Tech stocks sell off, driving demand for safe-haven assets; U.S. Treasury yields decline
CNBC
1h ago
Ai Focus
On Thursday, U.S. Treasury yields fell as investors continued to sell tech stocks and turned to bonds for safety after the release of the latest wholesale inflation data. In September, the U.S. Producer Price Index rose 6.3% year-on-year, higher than the 5.5% expected by economists surveyed by Dow Jones; previously released Consumer Price Index figures also exceeded expectations. The market still considers the possibility of the Federal Reserve raising interest rates by another 25 basis points before the end of the year.
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On Thursday, U.S. Treasury yields fell. After the release of the latest wholesale inflation data, investors continued to liquidate their positions in tech stocks and turned to bonds as a safe-haven asset.

The yield on the benchmark 10-year U.S. Treasury note tumbled by nearly 13 basis points to 5.066%; the yield on the 30-year U.S. Treasury note also fell to 5.40%. The yield on the 2-year U.S. Treasury note dropped by more than 6 basis points to 4.74%.

One basis point is equal to 0.01 percentage points, and the yield rate moves in the opposite direction to the price trend.

According to data from the U.S. Bureau of Labor Statistics, wholesale prices rose by 6.3% year-on-year in September, marking the largest increase since 2022. Economists surveyed by Dow Jones had previously predicted a growth rate of 5.5%.

This producer price report follows the latest consumer price index released on Wednesday, which also exceeded expectations. In September, the cost of goods and services in the U.S. economy rose by 0.6% month-on-month and 3.7% year-on-year, while the market generally expected increases of 0.6% and 3.6%, respectively.

Driven by broader risk-aversion sentiment, investors have turned to bonds. Concerns about higher inflation and higher interest rates are on the rise, and there is also worry that this will affect the boom in artificial intelligence spending, prompting investors to sell stocks of technology companies that have seen significant gains earlier on.

According to the CME FedWatch tool, these data have not significantly changed the market's expectations regarding interest rates. Federal Funds Rate futures still reflect that there will be at least one further interest rate hike before the end of the year, with a range of 25 basis points. Over the past month, the market's bets that interest rates will be higher than the current range of 3.75% to 4.00% for the Federal Funds Rate have increased significantly.

Northlight Asset Management Chief Investment Officer Chris Zaccarelli stated: "After inflation data exceeding expectations for a second consecutive day, it seems the Federal Reserve has no other choice but to raise interest rates again this year."

He also stated, "Although we do not expect them to raise interest rates later this month (as the midterms are too close), we do believe that they will raise the federal funds rate by another 25 basis points in December."

Last month, for the first time this year, the US central bank raised its benchmark lending rate, increasing the federal funds rate from the previous range of 3.50% to 3.75% to 3.75% to 4.00%.

Correction:Earlier versions of this article incorrectly described how traders price in the Federal Reserve's next interest rate decision.

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