FX.co ★ US 10-Year Yield Slides on Credit Market Fears

On Friday, the yield on the US 10-year Treasury note declined to approximately 3.95%, marking its lowest point since April. This drop was largely driven by increased demand for safe-haven assets due to resurfacing concerns over credit market risks. Shares of Zions and Western Alliance nosedived more than 10% following the banks' revelations of bad loans with two counterparties, heightening worries after the recent bankruptcies of auto parts manufacturer First Brands and subprime lender Tricolor. Additionally, escalating US-China trade tensions, the ongoing US government shutdown, and forecasts of further interest rate cuts by the Federal Reserve contributed to the decrease in yields. On Thursday, Federal Reserve Governor Christopher Waller expressed his support for another rate cut this month, citing escalating risks in the labor market. Meanwhile, Fed Governor Stephen Miran advocated for more aggressive easing measures. The Fed’s Beige Book also indicated economic stress, highlighting increased layoffs and decreased spending among middle- and lower-income households.