Treasury yields pulled back from multi-decade highs Thursday, with a rout in semiconductor stocks sending investors into government bonds and delivering relief the Treasury Department has struggled to engineer for months.
Chip Rout Sends Investors Into Bonds
The Kobeissi Letter said on X that the Treasury has spent months trying to push yields lower and “failed,” but the selloff in technology stocks “finally provided some relief.”
At the time of writing, the 10-year Treasury yield traded at 5.085% Thursday, down from a 24-year high of 5.36% last week, while the 30-year was at 5.429%, down from 5.73%, its highest level since 2002.
“When a drop in equities is the only way to lower yields, you should pay attention,” the market commentator added.
The iShares Semiconductor ETF (NASDAQ:SOXX) closed Thursday down 0.91% at $514.71, even as the broader market held up, with the S&P 500 up 0.33% at 7,744.06 and the Nasdaq Composite up 0.08% at 26,713.02.
Inflation, AI funding worries, Fed rate hike expectations and competition from China have all weighed on the sector.
Treasury’s Buyback Push Has Not Held
In August, the Treasury said it would raise the maximum size of its buybacks of 10 to 30-year bonds from $2 billion to at least $4 billion per operation.
Secretary Scott Bessent’s decision to double the purchases briefly sent yields lower before the bond market pushed back.
Yields kept rising in September even after the department lifted the operation to $6 billion.
Oil and Fed Hikes Keep Yields Elevated
The Kobeissi Letter said surging oil prices have rewritten the interest rate outlook.
At the start of the year, markets expected three Federal Reserve cuts, but the central bank raised rates in September, and officials see another increase by year-end.
At the time of writing, Brent crude was trading 0.69% lower at $105.19 a barrel, while WTI futures were down 0.79% to $97.20.
Inflation that has nearly doubled and a near-$2 trillion deficit have added to the pressure on borrowing costs.
Any sign the Iran war is ending, it added, could lower energy prices and let the Fed turn more dovish.
Price Action: The iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF) closed 0.71% up on Thursday at $90.35 and fell 0.014% in extended trading. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) closed 1.37% higher at $79.97 and rose 0.36% in after-hours.
The iShares 7-10 Year Treasury Bond ETF has a Momentum score in the 30th percentile, according to Benzinga Edge rankings.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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