Fears of an AI bubble spurred safe-haven buying, pushing U.S. Treasury yields to a three-week low.

US September CPI rose 0.6% month-over-month and 3.7% year-over-year, both exceeding expectations, yet Treasuries saw no sell-off. On Thursday, the US 10-year Treasury yield fell as much as 8.4 basis points to 5.105%, hitting a three-week low. Ongoing declines in AI tech stocks and rising associated credit risks drove capital back into Treasuries, outweighing rate-hike fears sparked by hotter inflation. Market concerns are spreading from overvalued AI stocks to the debt financing model for data center construction. Data center operator CoreWeave’s debt financing size is nearly $48 billion, with some of its bond yields rising to around 15% to 16%, sparking concerns over the AI sector’s debt-servicing capacity and private credit risks. BlackRock has downgraded its rating on US equities to "neutral", while upgrading its outlook on Treasuries and showing a preference for short-term Treasuries. Analysts note that recent trends show Treasuries are regaining their safe-haven status during stock market declines, suggesting the traditional stock-bond hedge relationship may be recovering. However, US inflation remains above the Fed’s 2% target, and fiscal deficit and Treasury supply pressures have not abated, so whether Treasuries can sustain their safe-haven function remains to be seen.