Treasuries Surge as Tech Stocks Plummet Post Midterm Elections

In a significant market shift, US Treasuries experienced a notable rally following the Democratic sweep in the recent midterm elections. This political outcome triggered a selloff in large US technology companies, leading investors to seek refuge in safer assets. As a result, Treasury yields fell across various maturities, with declines reaching as much as nine basis points, marking the lowest levels since early September 2026.

The Nasdaq 100 index plummeted by 4.75%, while the Philadelphia [Semiconductor](/topic/semiconductors) Index saw an even steeper drop of 8.83%. This downturn in tech stocks has raised concerns about the sustainability of capital spending in the [artificial intelligence](/topic/artificial-intelligence) sector, prompting a rotation from equities to bonds. According to Anmol Sinha, fixed income investment director at The Capital Group, "The fact that chip stocks are falling is an extension of the idea that there may be a pullback in the pace of capex spend. That’s causing a reaction."

The recent activity in the Treasury market reflects broader economic concerns. Investors are increasingly wary of a potential slowdown in the US economy, driven by diminishing enthusiasm for investments in AI infrastructure. This sentiment has led to a recalibration of expectations regarding future interest rate hikes by the [Federal Reserve](/topic/us-federal-reserve).

While traders are still pricing in a quarter-point increase during the Fed's final meeting of the year on December 9, the trading activity in short-term interest-rate options indicates a growing belief that the Fed may hold off on further rate adjustments. Thursday's market saw a notable shift, with many traders betting against additional rate hikes in the near future.

The Treasury options market has witnessed robust demand for hedges, reflecting investor caution and a desire for protection against further market volatility. Notable trades included one anticipating a decline in the 10-year yield, currently around 4.85%, to approximately 4.7% by the end of the following week. Another trade, expiring on November 20, targeted a further drop to around 4.35%.

Gregory Faranello, head of macro strategy at South Street Securities Holdings, commented on the market's current sentiment, stating, "Today is a risk-off move in our view. We are not chasing duration at these levels but respect the price action relative to risk assets for now."

Before the stock market opened on Thursday, Treasury yields had already begun to rise, influenced by an uptick in oil prices and jobless claims data that suggested resilience in the US labor market. This backdrop set the stage for the release of the October employment data, which is anticipated to provide further insights into the economy's health.

In a related development, major corporations like Apple Inc. have entered the bond market, with a substantial seven-part offering totaling $7 billion, maturing in two to ten years. This move underscores the ongoing demand for corporate debt amidst shifting market dynamics.

Additionally, public comments from Cleveland Fed President Beth Hammack and Richmond Fed President Tom Barkin indicated a preference for higher interest rates. Hammack, in particular, dissented from the Fed's recent decision to maintain current rates, advocating for an increase.

As the market grapples with the implications of the midterm elections and the shifting landscape of technology investments, the surge in Treasuries highlights a broader trend towards risk aversion among investors. The interplay between political developments, economic indicators, and corporate strategies will continue to shape market dynamics in the coming weeks. With the Federal Reserve's next meeting on the horizon, all eyes will be on how these factors influence monetary policy and investor sentiment moving forward.