Treasuries Fall as Tech Shares Rebound, Denting Haven Demand

“Market positioning is still quite tenuous given the recent whipsaw selloff and rally, which is keeping a lot of investors away, exacerbating the day-to-day moves,” said Gennadiy Goldberg, head of US interest rates strategy at TD Securities. Just last week, the tech index fell the most since April 2025, temporarily reigniting demand for Treasuries as a hedge against equity losses. Yields remain near multiyear highs reached in the past month, offering ample protection from a broader retreat from US stocks.

Treasuries were further pressured by higher oil prices Monday. US benchmark West Texas Intermediate crude oil futures rose 2.2% to the highest closing level in a month while global benchmark Brent crude touched a five-month high before settling lower on the day. Last week, bond investors largely ignored rising oil prices as concerns about falling tech shares overshadowed inflation worries. That marked a shift, however, from the past six months.

After the US attacked Iran in late February, oil became a key driver of Treasury yields as disrupted Middle East oil supply sparked a price surge. Rising energy prices led to higher US inflation and the first Fed rate hike since 2023. US rate strategists at UBS raised their year-end target for the 10-year yield to 5.2% based on “a more hawkish Fed path, limited near-term inflation progress, and a higher assumed oil-price trajectory.”

At the same time, bond strategists say short-term Treasuries could potentially rally as the market continues to price in about a 20% chance that the central bank will hike rates on Oct. 28, its next scheduled policy decision date, creating scope for Treasury gains if there’s no action. Hotter-than-expected September inflation data released last week briefly lifted wagers on an October rate hike to more than 50%, but those bets faded along with subsequent declines in US stocks.

Meanwhile, new corporate bonds also diverted investors from Treasuries, said Goldberg. There’s an unexpected debt offering from Walmart Inc. as well as Kimberly-Clark Corp.’s anticipated bond sale to finance its Kenvue Inc. acquisition scheduled for Monday. Kimberly-Clark needs nearly $7 billion in cash for its deal, while the world’s largest retailer seeks funds to expand. Treasuries faced an additional headwind from rising yields in most European government debt markets.

French yields led gains in the region, with the 10-year climbing 14 basis points to nearly 4.95%, the highest level since 2002. The country was rocked by cost-of-living riots over the weekend. With a budget deficit among the largest in the euro area, France’s sovereign debt is at risk of being downgraded by Moody’s Ratings on Friday. --With assistance from Edward Bolingbroke. (Adds oil price moves and chart. Updates yield levels and stock market moves.) More stories like this are available on bloomberg.com