Oct 15, 2026
The recent movement in US Treasury yields suggests that concerns over economic growth and the market impact of tighter monetary policy are competing with inflationary pressures. US CPI inflation rose to 3.7% in September, its highest level in two years, from 3.4% in August. The increase was largely driven by energy prices, with gasoline prices surging 9.1% from 3.9% in August, while fuel oil inflation accelerated to 15.3% from 10.1%. Consequently, the energy index rose 5.2%, compared with 2.1% in August. Core CPI, which excludes food and energy, increased 2.6% year-on-year, up from 2.4% in August, driven by medical care services and used cars and trucks.
Following the inflation data, risk-off sentiment weighed on equity markets, with investors seeking the safety of US Treasuries. US Treasuries rallied, pushing the 10-year yield lower to 5.09% from 5.30%, despite the inflation surprise. The key question is whether this decline in US yields is temporary or marks the beginning of a sustained downward trend. The direction will depend partly on the performance of Q3 US earnings, particularly among technology companies, and the implications for future investment spending, profitability and the Fed’s October policy outlook where a rate hike looks unlikely. According to CME Fedwatch, only 27% market participants expect a 25bps rate hike.
With the US Q3 earnings season underway, concerns have intensified over the potential impact of higher interest rates on capital-intensive AI investments, including data centres, servers and computing infrastructure. This has contributed to selling pressure in technology stocks. Overnight, the Nasdaq plunged nearly 3% to 29,624, while the S&P 500 dropped 1.1% to 7,718. In Asia, the ripple effect was evident in the KOSPI, which fell 8% to settle at 5,554, while the Nikkei dropped roughly 2.4% to 64,762 and the Hang Seng slipped 1% to 24,044.
However, Indian stocks turned positive, with the Nifty 50 surging 2% to 23,020 today, showing some temporary relief. Meanwhile, domestic bonds reacted positively to the fall in US 10-year Treasury yield, however the local 10Y bond yield will remain more influenced by liquidity drain out measures taken by the RBI, including OMO operations.
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