US bond market crash: 10-year, 30-year, 2-year yield notes fall to historic lows. Here's why

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US Federal Reserve 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 Artificial Intellience (AI) boom.

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US bond market — 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. (Reuters photo)

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Bond 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 yield on the benchmark US 10-year Treasury note was last down 6.4 bps at 4.925 per cent, and earlier hit its lowest level since mid-September. The yield on the 30-year bond was down 1.9 bps at 5.31 per cent, 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 per cent. It was set for its biggest monthly fall since August 2025.

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 US Federal Reserve 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 Artificial Intellience (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."
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The Personal Consumption Expenditures Price Index — the Fed's preferred inflation gauge - climbed 0.5 per cent 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 per cent after closing at 2.469 per cent on Thursday. The 10-year TIPS breakeven rate was last at 2.336 per cent, indicating the market sees inflation averaging about 2.3 per cent a year for the next decade.
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