AI trade rout sparks flight to Treasurys, bond yields sink: Chart of the Day

A sell-off in the AI trade has fueled investor interest in Treasurys, driving dramatic swings in bond yields.

The 10-year Treasury ( ^TNX ) yield, used as a benchmark for mortgages and other loans, sank 14 basis points to 5.05%. The 30-year yield (^ TYX ) also tumbled 13 basis points to 5.40%, as seen on Yahoo Finance's AlphaSpace chart below.

A global sell-off in chip stocks , exacerbated by AI financing worries , pushed investors toward Treasurys. Bond yields extended declines after reversing their gains on Wednesday following a hotter-than-expected inflation report.

The two-day action in bond yields could be a precursor to the road ahead if AI spending were to decelerate.

"It would weaken the USD and reduce US yields across the curve," wrote Thierry Wizman, global FX & rates strategist at Macquarie Group.

"That's because it would mark the end of superlative US growth against the rest of the developed economies," he said.

Bond yields have hit the highest levels in more than 20 years , raising concerns about higher borrowing costs and their impact on the broader stock market.

Sticky inflation has also led strategists to price in at least another rate hike this year. However, as of Thursday morning, market participants have raised their probability to 72% that Federal Reserve officials will hold rates steady at their policy meeting this month.

Macquarie Group strategists, along with UBS and Goldman Sachs analysts, see a Fed pause in October, followed by a rate hike at the Fed's December meeting.

Ines Ferre is a Senior Business Reporter for Yahoo Finance covering the US stock market, publicly traded companies, and commodities. She has reported live from the floor of the New York Stock Exchange and Nasdaq.