Hot inflation data combined with weak AI stocks—does that equate to a drop in Treasury yields?

According to PolyBeats monitoring, on October 15, investors continued to sell off tech stocks and moved funds into U.S. Treasuries as a safe haven. CNBC reported that the 10-year yield fell by more than 10 basis points at one point during the day to about 5.089%; the 30-year and 2-year yields also declined in tandem.

This week's hotter-than-expected CPI and PPI data would, in theory, raise rate hike expectations and trigger Treasury selling, thereby pushing U.S. Treasury yields higher. However, the continued decline in yields over the past two days runs counter to market expectations. On the prediction market Polymarket, the probability that "the U.S. 10-year Treasury yield falls below 4.7% this year" rose 12 percentage points in the past 24 hours and now stands at 28%; the probability of "falling below 4.6%" is currently 11%.

NoSteinNoGate bought $158.55 of "Yes" on "Will the U.S. 10-year Treasury yield fall below 4.6% this year?" at an implied probability of 5.99%. This trader has made 89 trades in the Fed interest rate category, with a 47% win rate and PnL of +$2.0k. This bet is 5.65 times their median bet size.

Current mainstream analysis holds that this week investors sold off AI/tech stocks and moved money into Treasuries as a safe haven; bond prices rose, and yields fell instead. CNBC wrote on October 15 that investors were "fleeing to the safety of bonds" amid the tech stock selloff; ActionForex's same-day review put it more bluntly: the yield pullback had already begun before the data was released, so "defensive bond buying during the tech stock selloff outweighed the upward yield pressure typically brought by stronger inflation."