Treasury yield plunge deepens as 10-year drops to 4.91%

Equities sold the AI story; bonds bought the safety bid. The Treasury yield plunge took the 10-year down more than 7 basis points to 4.91% in Friday's Tokyo session, leaving October lower by about 37 basis points, the largest one-month drop since December 2023, Reuters reported.

What happened

Two-year yields fell more than 8 basis points to 4.57%, and fed-funds futures rallied as traders dialed back some December hike odds after this week's Fed pause. The yen firmed to about 157.20 per dollar and the Swiss franc strengthened as haven flows broadened.

The catalyst was the same cash-flow scare hitting stocks: Alphabet's 12.6% slide, Amazon's after-hours drop and Intel's more than 20% plunge overnight. Pepperstone's Chris Weston told Reuters the market is questioning whether shareholders will earn adequate returns on AI capital, not whether the buildout can be financed.

That bond bid extends a move that already showed up earlier this month in the 10-year yield plunge to 4.95%, and it now has company from the Alphabet earnings miss that wiped hundreds of billions of equity value.

Bond gains of this size in a single month usually need either a growth scare or a policy pivot. This week delivered the first via AI cash-flow anxiety and a Fed that paused without promising the next hike date.

Haven flows also showed up in the yen and Swiss franc, confirming that Friday was a broad de-risking session rather than a pure duration squeeze. When equities, crypto and credit all wobble together, Treasuries remain the default shock absorber.

Why it matters

The Treasury yield plunge matters for every duration-sensitive asset, from housing to crypto beta. Lower yields ease financial conditions even as equity multiples compress on earnings fear—a messy mix for risk parity and for any December Fed hike call.

If AI-spend anxiety keeps feeding the bid, October's 37 basis-point decline becomes the story of the month, not a one-day blip.

Lower front-end yields ease mortgage and corporate funding math even as equity multiples compress, which is why the same news can look risk-off in stocks and risk-on in duration.

What's next

Friday's New York close will show whether 4.91% holds once U.S. cash Treasuries reopen fully. Reuters' Asia market wrap has the session marks. The Treasury yield plunge is the bond market's answer to this week's Big Tech shock.

A New York session that holds near 4.91% would confirm the Asia move; a snapback above 5% would mark Friday as noise inside a still-volatile October.

October's bond rally also recalibrates December Fed pricing at the margin. A 37 basis-point monthly decline in the 10-year is large enough to ease financial conditions even if equity volatility stays elevated on AI earnings fear.