AI trading concerns reignite: global bond markets see renewed safe-haven buying, funds flow back into U.S. Treasuries

Jitong Finance APP noted that during Thursday's Asian trading session, U.S. Treasury bonds rose, while the Japanese yen and Swiss franc simultaneously strengthened. As concerns about artificial intelligence-driven trading once again weighed on the stock market, investors flocked to safe-haven assets for protection.

U.S. Treasury yields across the curve fell by at least 3 basis points, with the 30-year yield touching 5.38%, the lowest since September 23. Australian and New Zealand government bonds also climbed, while the yen appreciated as much as 0.3% against the U.S. dollar.

Eugene Liu, Senior Rates Strategist at DBS Bank, said: "As investors reassess AI-related assets, market sentiment seems to have become increasingly fragile lately. A cautious mood about profitability and investment returns appears to be quietly spreading. Since U.S. yields remain high by recent standards, investors may be looking to hedge some risks by buying Treasuries as a safe haven."

The stock market decline has reignited the safe-haven status of U.S. Treasuries, after worries about accelerating inflation had pushed yields to multi-year highs in recent weeks. The trajectory of the world’s largest government bond market may depend, to a certain extent, on whether high oil prices or concerns over AI stock trading take precedence.

Buying of U.S. Treasuries emerged as a deadly attack in Saudi Arabia clouded supply prospects, pushing crude oil prices higher. Elevated energy costs heightened inflation concerns and led traders to bet that the Federal Reserve and other global central banks would continue to raise interest rates.

Bloomberg's U.S. Treasury Return Index, after posting its biggest monthly drop in nearly two years in September, has risen about 1.2% in October.

Kenneth Crompton, Head of Rates Strategy at National Australia Bank, said: "Although oil prices are recovering slowly, U.S. Treasuries are once again feeling inflows from safe-haven funds."

Australia's 10-year government bond yield declined 3 basis points to 5.25%, New Zealand's 2-year government bond yield fell 2 basis points to 3.91%. The yen appreciated 0.3% against the U.S. dollar to 157.68, the Swiss franc rose 0.2%, and the U.S. Dollar Index was little changed.

David Forrest, a strategist at Credit Agricole, said: "The decline in S&P 500 index futures is boosting the yen. Importantly, this rise is broad-based, even strengthening against the U.S. dollar, highlighting the yen’s safe-haven status when the AI boom is unsettled."