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27.01.2025

U.S. Treasury yields decline amid AI-induced stock volatility and Fed decision anticipation

U.S. Treasury yields fell on Monday as investors sought safety amid a sharp stock market sell-off, driven by concerns over AI developments. The 10-year Treasury yield dropped eight basis points to 4.54%, while the 2-year yield declined over six basis points to 4.208%. (Yields move inversely to prices, with one basis point equaling 0.01%.)

Nasdaq 100 futures led the decline, hit by a sharp selloff in technology stocks. This followed news of Chinese AI startup DeepSeek performing "on par" with OpenAI's ChatGPT with an open-source AI model developed for under $6 million, raising questions about massive AI spending.

Simultaneously, attention shifts to the Fed’s Wednesday monetary policy decision, with traders expecting no rate change. President Donald Trump called for immediate rate cuts last week in Davos, despite limited Fed projections for rate adjustments in 2025. The upcoming personal consumption expenditures index will shed light on inflation trends, which are critical for the economic outlook.

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