A steep selloff in artificial intelligence equities and surging credit risk premiums prompted investors to flee to safety, driving 10-year Treasury yields below 5% for the first time in a month while boosting bond ETF inflows.
- An AI-linked equities basket (SOX) dropped, and the Nasdaq 100 capped its worst two-week decline since April 2025; investors poured into U.S. Treasuries, driving the 10-year yield back below 5.00%.
- The U.S. Dollar Index eased marginally, down 0.2%, this week.
- The yield curve flattened further this week, with 10-year yields falling about 8 basis points over the previous week.
U.S. government bonds staged a powerful rally during the week ending October 23, as a sharp retreat in artificial intelligence tech stocks and rising corporate credit risks sparked a major flight-to-quality rotation into fixed income.
The sudden reversal reflects growing investor anxiety regarding the hundreds of billions of dollars in corporate borrowing earmarked for AI computing infrastructure. Gartner warned this week that AI data center owners could face up to $4 trillion in asset write-down risks by 2032 if hyperscaler revenue fails to cover massive capital expenditure commitments.
The benchmark 10-year Treasury yield fell back below the 5.00% threshold for the first time in four weeks. The 30-year U.S. Treasury yield slipped 10 basis points from the previous week to 5.32% for the week ending Oct. 23.
The spread between the U.S. 10-year yield and the U.S. 2-year yield ticked lower to 0.31% in the week, from 0.37% a week ago.
The iShares 20+ Year Treasury ETF (TLT) ended the week 1.6% higher, while the shorter-duration iShares 1-3 year ETF (SHY) added about 0.2%. The slight recovery in the shorter-duration bond ETF may reflect easing short-term inflation pressure; however, markets still factor in one more rate hike in December.
Retail sentiment on TLT and SHY was ‘bullish,’ with ‘high’ message volumes.
| Asset / Benchmark | Weekly Close | Weekly Change |
| U.S. Dollar Index | 101.75 | -0.2% |
| U.S. 2-Year Treasury Yield | 4.69% | -2 bps |
| U.S. 10-Year Treasury Yield | 5.00% | -8 bps |
| U.S. 30-Year Treasury Yield | 5.32% | -10 bps |
| U.S. 10Y2Y Yield Spread | Flattening curve | – |
Yield Curve & Global Sovereign Markets
Yield curve flattening trends persisted as short-duration yields eased more slowly than the long end, keeping the gap between 2-year and 10-year Treasuries tightly compressed.
Alternatively, corporate credit spreads widened, signaling growing stress in corporate balance sheets. Credit default swap prices on specialized “neocloud” providers and major AI hardware builders surged as markets questioned their ability to service burgeoning debt loads.
For instance, CoreWeave’s (CRWV) widening credit spreads pushed its stock to lose about 12% this week, its third straight weekly decline.
International sovereign bond markets followed similar trajectories. German 10-year Bund yields and other major sovereign yields mirrored the U.S. decline, reflecting broad-based global demand for safe-haven assets.
The Dollar Spot Index slipped 0.2% this week, extending last week’s weakness against a basket of developed market currencies.
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