Panic-driven fund frenzy for US Treasury bonds, strategists betting on yields falling to 3.8%

On Wednesday, global stock markets experienced a sell-off, driving up market risk aversion and pushing bond prices higher. All varieties of US Treasury bonds rose, pushing the yield on the benchmark 10-year US bond to a one-week low. Previously, concerns about overvaluation in tech stocks had already impacted global stock indices. Australian and New Zealand government bond yields also fell during the same period, with Japanese government bond yields also slightly decreasing. With concerns about overvaluation in tech stocks impacting global stock indices, the outlook for US Treasury bonds, considered the safest asset globally, has become a focal point for the market. Wall Street executives such as Morgan Stanley's Ted Pick and Goldman Sachs' David Solomon have warned that the stock market may further decline, and strategists are considering whether there is further room for the $73 trillion bond market to continue rising. DBS Bank believes that if the stock market continues to decline, the yield on the 10-year US Treasury bond could drop from the current level of around 4.07% to 3.8%; TD Securities predicts that by the end of 2026, the benchmark yield will fall to 3.50%. Prashant Newnaha, Senior Interest Rate Strategist at TD Securities, stated, "Corporate executives' warnings about valuations and capital expenditure have raised concerns. Combined with the US government shutdown, weak data, and thin liquidity, these factors have created conditions for a continuation of risk aversion mode - traders will seek the most liquid safe assets, leading to increased demand for bonds." The selling pressure has already caused significant market cap reductions: on Tuesday, the Philadelphia Semiconductor Index lost around $500 billion in market value; on Wednesday, the Bloomberg Asia Chip Index also experienced a decline. During the Asian trading session, the yield on the 10-year US Treasury bond briefly fell by 3 basis points to 4.05%; as of writing, the yield has risen back to around 4.07%. Analyst Mark Cranfield wrote, "Macro traders are capitalizing on profit-taking opportunities before they disappear, to offset losses from the rapid decline in AI-related stocks, and this situation may continue." Chua Shana, Chief Investment Strategist at Saxo Markets in Singapore, stated, "Bond buying is a mirror reaction to the decline in AI (stock) themes, reflecting a trend of funds moving towards safe assets when stock market volatility increases. In short, this is a bond rally driven by position adjustments, rather than a macro turning point - at least for now."