Treasury prices soar as U.S. stocks plummet... flock to safe assets

While the New York stock market plunged to a sell-off level, led by technology stocks, on the 5th (local time), the price of U.S. Treasury bonds, a safe asset, rose significantly.

U.S. Treasury interest rates plunged by up to 12bp (1bp = 0.01% point) for each maturity on this day. It fell to the lowest level since early September.

Treasury futures trading volume also exceeded the average for the past 20 days by about 40%.

Bloomberg News reported that in the U.S. Treasury options market, demand for hedging against further interest rate declines resulted in large-scale trading, with bets that the 10-year yield would fall to 4.7% by the end of next week and options expected to plummet to 4.35% in options expiring on the 20th.

It is interpreted that funds were flowing into the bond market while the Nasdaq 100 index, centered on technology stocks, fell 6.4% and the Philadelphia Semiconductor Index fell 12%.

Last month, the U.S. Treasury market posted its biggest gain in two years as doubts grew about the sustainability of capital spending on artificial intelligence (AI) infrastructure.

As the Democratic Party takes control of both the Senate and House of Representatives in the midterm elections, concerns have grown that regulations on the AI ​​and big tech industries will be strengthened.

As AI fever cooled, U.S. economic growth slowed and expectations of future interest rate hikes by the Federal Reserve dropped significantly.

Amid the preference for safe assets, Apple began issuing corporate bonds worth $7.5 billion (approximately KRW 10 trillion) from 2-year to 10-year bonds, while Microsoft, Oracle, and Meta also recently poured bonds worth $50 billion (KRW 68 trillion) into the market.