AI Debt Fears Leads Investors To Seek Safer Havens. The 10-Year Treasury Yield Slipped Below 5%.

Investors sought shelter in U.S. government bonds this week as concerns about the debt financing of artificial intelligence infrastructure rattled technology stocks, pushing the benchmark 10-year Treasury yield below 5% for the first time in a month.

The yield stood near 4.99% on Friday, up about 3 basis points for the session but still below the threshold it breached Thursday. The retreat reflected renewed demand for Treasuries as investors questioned whether technology companies' enormous spending commitments would deliver sufficient returns.

The shift marked a reversal from earlier this month, when yields on 10-year and 30-year government debt climbed to their highest levels in more than two decades. Investors are now weighing mounting risks in the AI trade against persistent inflation pressures that could keep interest rates elevated.

CoreWeave has become a focal point of the anxiety surrounding AI financing. Shares of the cloud infrastructure company fell 10% Thursday and were down 38% for October.

The strain extended beyond the stock. The yield on CoreWeave's 9.75% bond maturing in 2031 reached 15.72%, while its five-year credit default swap spread stood at 1,138 basis points. Such contracts provide protection against default, and spreads above 1,000 basis points are generally associated with distressed debt.

The Fed meets next week, with markets expecting policymakers to leave their benchmark rate unchanged at 3.75% to 4.00%. However, traders were pricing in approximately a 70% probability of a quarter-point increase in December.

Friday's economic reports offered little reassurance that inflation pressures were fading. The University of Michigan's final October consumer sentiment index registered 48, barely changed from September but down 10.4% from a year earlier. Consumers' expectations for inflation over the next year rose to 4.7%, while their five-year outlook increased to 3.5%.

Meanwhile, S&P Global's manufacturing purchasing managers index reached 56, exceeding the 55.3 forecast and marking its highest reading in 53 months. Energy markets added another complication. December West Texas Intermediate futures climbed nearly 3% to $102.39 a barrel Friday, while Brent crude rose approximately 2.5% to $115.94.

Fresh attacks by Iran-backed Houthi militants on Saudi Arabian oil installations heightened concerns about supply disruptions. Higher energy costs could reinforce inflation pressures even as stock market losses tighten financial conditions. Other Treasury maturities also edged higher Friday. The two-year yield rose about 5 basis points to 4.69%, while the 30-year yield increased roughly 2 basis points to 5.31%.