A significant sell-off in U.S. stocks on January 27, 2025, has led to a notable decline in U.S. Treasury yields, pushing bond prices to their highest levels this year. The 10-year Treasury bond yield fell to 4.504%, nearing the critical 4.5% support level, while the 2-year Treasury yield dropped to 4.17%. This movement has narrowed the 10y-2y spread to 0.335%, reflecting a shift in investor sentiment towards risk-off strategies amid the stock market downturn. The decline in yields is not attributed to changes in Federal Reserve policy expectations but rather to heightened market concerns, particularly ahead of the Fed's upcoming meeting. Investors are closely watching for any indications of a dovish shift, although a rate cut remains unlikely.
Additionally, the announcement of China's DeepSeek R1 large language model has further influenced market dynamics, prompting investors to seek the relative safety of U.S. Treasuries. This has contributed to the decline in yields as equities faced downward pressure. The bond market's response underscores the current risk-averse sentiment, with investors prioritizing stability amid global economic uncertainties.
The Direxion Daily 20-Yr Treasury Bull 3x ETF (TMF) rose to $40.37, marking a 2.63% increase from the previous close.