Falls to a new three-month low, the 10-year U.S. Treasury yield hits the 4.0% mark, with risk aversion and a correction in U.S. stocks supporting the strength of U.S. Treasuries

Cailian Press, February 27 (Editor: Yang Bin) After significant fluctuations in January, U.S. Treasury bonds quietly recovered in February, supported by multiple factors.

This month, the 10-year U.S. Treasury yield fell nearly 30 basis points, recently touching 4.0%, the lowest in three months. Despite strong U.S. inflation and employment data, and waning expectations of rate cuts, safe-haven demand and stock market volatility have supported U.S. Treasuries. Institutional sources say that if resistance at 4.0%-4.01% for the 10-year Treasury cannot be broken, yields may seek a phase bottom and then rebound.

Early this morning, U.S. Treasury yields declined significantly. The 10-year yield dropped about 4.5 basis points, hitting 4.0%, the lowest since November last year.

In the short term, indirect negotiations between Iran and the U.S. have concluded, with Iran’s foreign minister stating there are disagreements, and technical talks are scheduled for March 2. Additionally, U.S. initial jobless claims for the week ending February 21 were 212,000, below the expected 215,000.

Chart: 10-year U.S. Treasury yield trend

(Source: Wind Data, Cailian Press compilation) The recent strength in U.S. Treasury yields began in early February, with the 10-year yield falling from nearly 4.30% by about 30 basis points, but during the Chinese New Year holiday, yields rebounded temporarily.

During this period, the January Federal Reserve meeting minutes mentioned “bilateral risks,” with some officials discussing the possibility of rate hikes. U.S.-Iran geopolitical tensions escalated, boosting market safe-haven demand and inflation expectations. Moreover, on February 20, the U.S. Supreme Court ruled on the legality of tariffs, but the Trump administration quickly implemented new tariffs, increasing policy uncertainty.

Xu Liang, Chief Fixed Income Analyst at Guolian Minsheng Securities, believes that driven by hawkish disagreements in the Fed minutes and the Supreme Court’s tariff ruling, U.S. Treasury yields rose sharply at key points, and market expectations for rate cuts have further receded. Additionally, losses in tariff revenue and potential refund pressures have heightened concerns about expanding U.S. fiscal deficits and increased debt supply, putting overall pressure on the bond market.

However, after the tariff ruling turmoil, Treasury yields surged then fell back, with the 10-year yield dropping about 9 basis points this week.

Research from Dongfang Jincheng indicates that uncertainty around tariff rulings, Trump’s alternative tariff measures, and the Section 301 investigation has increased, and concerns over escalating U.S.-Iran-Middle East geopolitical risks may lead to intermittent safe-haven inflows into bonds, which could suppress U.S. Treasury yields to some extent.

Despite recent strong U.S. employment and inflation data, U.S. Q4 GDP growth was below expectations. The initial estimate for Q4 real GDP annualized quarterly growth was 1.4%, the lowest since Q1 2025.

Additionally, Zheshang Bank’s FICC team noted that the decline in U.S. stocks has supported Treasuries. Earlier this week, concerns about AI potentially impacting corporate profits resurfaced, especially after Citrini Research released “The Global AI Crisis 2028,” highlighting potential risks AI poses across industries, affecting tech, delivery, and payment stocks.

U.S. stocks declined overnight again, with the S&P 500 down 0.54%. Tech stocks fell sharply, with the Nasdaq down 1.18%.

Zheshang Bank’s FICC team pointed out that safe-haven sentiment has driven Treasury yields back to lows, mainly in the mid-term. With GDP growth slowing and optimism about AI’s impact on economic growth waning, long-term Treasury pessimism has not yet been corrected. The institution suggests monitoring the extent of this stock market correction; if the correction remains limited, resistance at 4.0%-4.01% for the 10-year Treasury may be difficult to break, and yields could seek a phase bottom and then rebound.