The yield on the US 10-year Treasury note dropped nearly 13 basis points to 5.05% on Thursday, reflecting a broad flight to safety amid a global equity sell-off and a sharp pullback in technology stocks. The decline in risk assets was driven by mounting doubts over the sustainability of AI-related investment in a persistently high interest rate environment.
A substantially hotter-than-expected US PPI report did little to alter expectations that the Federal Reserve will keep borrowing costs elevated for an extended period. Producer prices jumped 1.3% month-over-month in September, the largest increase since March 2022 and far above the 0.5% rise forecast by markets. This followed a similarly strong CPI reading released the previous day, reinforcing signs that inflationary pressures are reaccelerating.
At the same time, retail sales advanced 0.8%, well above the 0.3% consensus estimate, underscoring the resilience of consumer demand. Futures pricing currently suggests that traders expect the Fed to leave rates unchanged at its upcoming meeting, while assigning a high probability to a 25-basis-point rate hike in December.
