US Treasury yields fall as AI worries lift safe-haven demand

US Treasury yields fell on Wednesday, October 21, as concerns about the cost of financing artificial-intelligence infrastructure encouraged demand for government debt ahead of a $13 billion auction of 20-year bonds. The Economic Times Markets, citing Reuters, reported that the benchmark 10-year yield was heading for a second straight daily decline.

The 10-year yield dropped 1.5 basis points to 5.102%. The 30-year yield fell 1.2 basis points to 5.413%, while the two-year yield eased 0.9 basis point to 4.778%. These figures reflect the report’s market snapshot, rather than closing levels.

AI financing concerns spill into bonds

Investors were assessing how higher borrowing costs could affect companies such as CoreWeave as they fund expensive AI infrastructure. The report described a pattern in which pressure on AI-linked equities has prompted investors to move towards Treasuries. Bond prices and yields move in opposite directions.

US stocks were slightly higher at the time of the report, but CoreWeave shares declined, underscoring the uneven performance of AI-linked businesses.

Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana, described investors rotating between equities and Treasuries as their appetite for risk changed. He also said a 10-year Treasury yield around 5.1% was becoming a competitive alternative to equities for investors seeking fixed-income returns.

The benchmark yield had fallen 14.6 basis points over the week so far, a move the report described as its largest weekly decline in eight months. That was an in-progress comparison, not a completed weekly result.

Rate-hike bets ease as debt auctions approach

Yields declined despite inflation readings that the report described as stronger than expected. CME FedWatch pricing cited in the report put the probability of a quarter-percentage-point Federal Reserve rate increase at the October 28 meeting at 14.9%, compared with 33.2% a week earlier and 57.6% a month earlier. Those probabilities reflect market pricing, not a commitment by the Fed.

Alongside Wednesday’s planned $13 billion sale of 20-year bonds, the US government was scheduled to auction $26 billion of five-year Treasury Inflation-Protected Securities, or TIPS, on Thursday. The report preceded the 20-year auction and did not establish its outcome.