US bonds rally, sending yields to biggest monthly decline since 2023

Agencies

The yield on the 10-year US Treasury was last down 36 basis points for October, most for a month since December 2023. It also had a fourth straight week of declines, its longest such stretch in a year.

The Nasdaq fell more than 2% after earnings reports from Amazon and Intel rattled investors already concerned about the rising costs of the AI buildout.

Reliance Industries has approved plans to raise up to Rs 15,000 crore through non-convertible debentures via private placement. The fundraising announcement came with the company's Q2 earnings where it reported a 41% year-on-year rise in net profit to Rs 25,548 crore.

The rally in US Treasuries prices in recent weeks follows a sharp selloff that pushed yields to multi-decade highs on worries about rising energy costs and rising government debt.

"The last few weeks have just been an absolute sentiment shift," said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York. "The risks have really started to re-emerge, whereas a few weeks prior to that, everything was viewed as an upside risk to rates."

"To some extent, for rates investors, this is a question of whether the AI jitters persist or whether this is just a bump in the road on the way to rates remaining higher for longer."

Expectations for a December US interest rate hike remain high after the Federal Reserve this week left rates unchanged and upgraded its assessment of the economy. Rate futures are pricing in about a 70% chance of a quarter-point hike from the Fed in December, according to the CME FedWatch tool on Friday. That is down from about 78% late Thursday.

Dallas Fed President Lorie Logan said on Friday the US central bank needs to raise rates at least two more times to get inflation under control.

The Fed in September raised rates for the first time in three years in an effort to combat higher inflation, tied in part to high energy prices and the AI boom.

"It's not like we think that this should be interpreted as a dovish shift," said JoAnne Bianco, partner and senior investment strategist at BondBloxx Investment Management. "We think the committee still remains prepared to tighten further if necessary. A December hike is very much on the table."

The yield on the benchmark US 10-year Treasury note was last down 6.4 bps at 4.925%, and earlier hit its lowest level since mid-September. The yield on the 30-year bond was down 1.9 bps at 5.31%, and was also set for its biggest monthly drop since December 2023.

The two-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, was down 8.1 bps at 4.575%. It was set for its biggest monthly fall since August 2025.

Amazon And Intel Shares Both Fall

Amazon's shares fell after the company reported a sharp cash outflow and another increase in spending, while chipmaker Intel was down 29% after it warned that it would burn cash this year. Yields also fell on Thursday after disappointing results from top AI player Alphabet.

The Personal Consumption Expenditures Price Index - the Fed's preferred inflation gauge - climbed 0.5% last month, in line with expectations, while the US economy grew faster than expected in the third quarter.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 34.6 bps.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.461% after closing at 2.469% on Thursday.

The 10-year TIPS breakeven rate was last at 2.336%, indicating the market sees inflation averaging about 2.3% a year for the next decade.