(Bloomberg) -- Treasuries rose, sending longer-maturity yields toward their lowest levels of the year, amid a fresh slump in US technology shares.
US government bonds were buoyed by a rally in the UK market, while Friday's month-end Treasury index rebalancing — incorporating sizable quarterly issuance — may trigger additional buying from passive investors.
Yields across maturities declined by at least two basis points and as much as four basis points, led by the seven-year sector even as investors were preparing for the monthly auction of the tenor at 1 p.m. New York time. The 10-year note's yield declined as much as four basis points to 4.01%, its lowest level since Nov. 28.
"Uncertainty in tech sector valuations has translated into a solid bid for Treasuries that has pushed 10-year yields below 4.02% yet again," said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
Technology shares in the S&P 500 Index fell as much as 2.9% led by Nvidia Corp. shares, which slumped 5.6% after reporting quarterly results after the close Wednesday.
The rout in technology shares was the biggest since Feb. 12, when worries about artificial-intelligence disruption engulfed industries from logistics to commercial real estate. An auction of 30-year Treasuries that day drew historic demand, and unleashed buying that drove yields to year-to-date lows on Feb. 17.
Treasuries held gains despite a rebound in the price of crude oil against the backdrop of a US military buildup in the Middle East. US President Trump Feb. 19 said Iran had to agree to terms for its nuclear program in 10 to 15 days. Oil prices have been a barometer for progress of ongoing negotiations, moving inversely with the perceived likelihood of an accord.
Friday's month-end index rebalancing is projected to spur larger-than-average demand for Treasury risk as it will sweep in 10-, 20- and 30-year new issues that were auctioned this month.
"Today's trade is pretty clearly a risk-off rotation out of equities and into duration," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. "We also have month-end buying, and February tends to be a pretty heavy rebalancing month for index investors."
Thursday's rally lowered the expected yield for the seven-year auction, the last sale of a Treasury note or bond until March 10. The notes' yield in pre-auction trading was around 3.79%, down from as high as 3.85% on the day the auction was announced last week.
UK government bond yields declined without a fundamental catalyst, sending the 10-year yield to 4.27%, the lowest since December 2024, and the 30-year to 5.08%, the lowest since April.
"There's something going on bringing money back into the fixed income arena," said Tony Farren, managing director in rates sales and trading at Mischler Financial Group. "Global bond markets are on the verge of breaking out into a massive rally."
--With assistance from Miles J. Herszenhorn and Ye Xie.
(Adds context throughout and updates yield levels.)
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