Global markets are witnessing a sell-off driven by fears over inflated tech valuations, with investors flocking to US Treasuries as a safe haven. DBS Bank predicts the 10-year Treasury yield could drop to 3.8% from its current level of 4.07% if equity declines persist, while TD Securities forecasts a further slide to 3.5% by late 2026.

The tech rout has triggered a chain reaction, sending shockwaves through semiconductor stocks. The Philadelphia Semiconductor Index and Bloomberg Asia Chip Stock Index collectively lost approximately $500 billion in market value this week, reflecting growing concerns about an AI investment bubble.

According to Charu Chanana, Chief Investment Strategist at Saxo Markets, bond buying mirrors the sell-off in AI-themed equities, with rising stock volatility driving capital toward safer assets. She emphasizes this bond rally is primarily position-driven rather than signaling a macroeconomic shift.

Prashant Newnaha, Senior Rates Strategist at TD Securities, notes that warnings from CEOs about valuations and capital expenditures have heightened market anxiety. Factors like potential US government shutdowns, weak economic data, and liquidity constraints are fueling sustained risk-off sentiment.

As traders pivot to highly liquid safe-haven assets, Treasury demand is expected to climb further, potentially pushing yields lower. The benchmark 10-year yield recently hit a one-week low amid ongoing equity market turbulence, with similar declines observed in Australian, New Zealand, and Japanese government bonds.

Wall Street heavyweights including Morgan Stanley’s Ted Pick and Goldman Sachs’ David Solomon have cautioned about extended equity declines, underscoring the $73 trillion bond market’s potential for renewed gains.