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Investors sought shelter in Treasurys this week as anxiety over artificial intelligence spending slammed technology stocks and pulled the benchmark 10 year Treasury yield below 5%. The retreat reflected a broader rush for cover as pressure spread through stocks and corporate credit.

The benchmark yield first moved beneath 5% on Thursday, marking its first drop below that level in a month. It remained under 5% on Friday as investors continued to question the enormous debt technology companies are assuming to finance their AI network construction.

Those concerns were visible across several corners of the market. Technology stocks fell, yields on outstanding technology company debt climbed, and credit default swap spreads widened among a range of AI companies.

BMO’s credit strategy team connected the Treasury rally with the market’s retreat from technology shares. The team also pointed to continued weakness in France’s sovereign market as another factor supporting demand for Treasurys.

“The selloff in tech stocks drove the flight-to-quality bid, compounded by continued weakness in the French sovereign market,” BMO’s credit strategy team said in a note Friday. “Interestingly, the focus on weakness in the equity market ... [has] overshadowed the move in the energy market, with Treasuries rallying despite WTI crude oil testing $100/bbl.”

On Friday, the yield on the 10 year U.S. Treasury rose 4 basis points to 4.997%. Despite that increase, the yield remained below the psychologically significant 5% level that it crossed on Thursday.

The 10 year Treasury yield is widely used to price borrowing costs across the economy. According to the source, it helps determine rates for mortgages, automobile loans, and credit card debt.

The yield on the 2 year Treasury note increased 5 basis points to 4.692% on Friday. That maturity more closely tracks the Federal Reserve’s short term interest rate policy, placing additional attention on the central bank’s approaching decision.

Longer dated government debt also moved on Friday. The yield on the 30 year U.S. Treasury, which reacts to geopolitical developments, climbed 3 basis points to 5.31%.

Bond yields and prices move in opposite directions, meaning prices rise when yields fall and prices decline when yields increase. One basis point equals 0.01%, or 1/100th of 1%.

The Treasury moves arrived as traders prepared for the Federal Reserve’s interest rate decision next week. That looming announcement kept monetary policy squarely in view as markets contended with weakness in technology shares and rising energy prices.

Traders were also set to examine Friday’s flash S&P Global PMI readings for manufacturing and services. Those figures were expected to offer a fresh look at conditions surrounding U.S. growth and inflation.

Energy costs remained an important inflation concern even as investors bought Treasurys. The bond rally continued while West Texas Intermediate crude tested and ultimately moved above $100 a barrel on Friday.

West Texas Intermediate futures for December delivery advanced 1.16% to $100.61 a barrel. Brent crude, the international oil benchmark, traded 0.79% higher at $114.06 a barrel.

The firmer oil market followed fresh attacks by Iran backed Houthi militants against Saudi Arabian oil installations. Those attacks generated new fears that global markets could face a squeeze in available oil supplies.

Reports earlier in the week suggested that the U.S. and Israel could resume strikes against Iran following the midterm elections on Nov. 3. The reports added another geopolitical concern as energy prices rose and longer dated Treasury yields reacted.

Investors therefore faced pressure from several directions during the week, including AI financing worries, falling technology stocks, weaker corporate credit conditions, and higher oil prices. Against that unsettled backdrop, the 10 year Treasury yield finished Friday at 4.997%, holding just beneath 5%.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.