Treasuries surge as worldwide worries spark rush to safety

Treasury prices jumped to their highest level in over a year on October 22, driven by global concerns and a flight to safety. AI-related stock declines, French market turbulence, and Middle East tensions contributed to the surge in demand for U.S. government bonds. The 10-year yield fell below the 5% level for the first time in a month as traders rushed to cover short positions.

Concerns about AI's investment sustainability and its potential payoff led some investors to hedge with bonds. The rally continued despite Brent crude oil futures spiking past $112 per barrel due to deadly attacks in Saudi Arabia, which raised worries about supply disruptions. Inflationary pressures from higher energy prices, once a major force behind bond losses, are now being seen as a potential risk to growth.

French yields reached multi-year highs, outperforming German counterparts, further bolstering the appeal of U.S. Treasuries. Semiconductor shares, a benchmark for AI investments, plummeted, contributing to the positive sentiment around Treasuries. The U.S. Treasury auction of five-year TIPS yielded 2.367%, the highest since October 2023, reflecting the heightened demand for safety. Treasury prices gained 1.2% in October, marking the end of a nearly two-year decline.