By Vivien Lou Chen
Concerns about AI's potential as a destructive force on U.S. jobs have contributed to a rally in the 10-year note and 30-year bond, sending their yields to the lowest levels since November
The AI fear trade appears to be spilling into the U.S. bond market, according to Lawrence Gillum of LPL Financial.
The bond market has caught a bid over much of the past month, with buyers stepping into a crucial part of the $30 trillion Treasury market partly because of anxiety over artificial intelligence's potential to wipe out many U.S. jobs, according to strategist Lawrence Gillum of LPL Financial. Under Gillum's theory, the Treasury market's recent rally in long-dated government debt, and the resulting drop in yields, is linked at least in part to broader fears about AI's destructive capacity. In other words, AI-driven anxiety may be pushing bond-market yields lower.
On Thursday, the benchmark 10-year yield BX:TMUBMUSD10Y, which is a peg for pricing new 30-year fixed mortgages, finished below 4.02% and at its lowest level since Nov. 26, according to Dow Jones Market Data. Meanwhile, the yield on the 30-year bond BX:TMUBMUSD30Y fell below 4.7% to the lowest 3 p.m. Eastern time level of the past three months. The drop in yields occurred despite a lack of any data or non-AI-related events that could explain those moves.
Falling long-term yields since January have spilled over into mortgage financing, where rates for new 30-year fixed mortgages have fallen below the 6% threshold for the first time in 31/2 years, according to Freddie Mac.
Read: Mortgage rates fall below 6%, giving buyers a glimpse of affordability
Treasury yields can be influenced by a variety of things - such as the outlook for the U.S. economy and inflation, expectations for the path of interest rates, and rising geopolitical risks in the Middle East. What's interesting now is that long-term yields are trending lower even though the U.S. economy is holding up, expectations for the Federal Reserve's next rate cut have been pushed back to July, and the U.S. and Iran are involved in nuclear talks in Geneva that could reportedly produce an agreement. While economic data have been mixed, most U.S. companies have avoided widespread layoffs - keeping a &#34;low-hire, low-fire&#34; labor market in place. So long as workers have jobs, lower mortgage rates could help improve affordability issues. Yet fears of layoffs might still act as a counterbalance.
Read: CEOs say they won't add many jobs in 2026. Is a low-hire, low-fire labor market the new norm?
Within the bond market, &#34;there's been an ongoing bid related to job displacements from AI, and we've seen a drop in yields over the past couple of weeks because of that,&#34; LPL Financial's Gillum said in a phone interview. Thursday's bond-market moves &#34;seem like a continuation of that trade,&#34; he noted. The strategist added that traders seemed to be more focused on AI's disinflationary impacts than on the potential for elevated inflation pressures over the next few years.
On Thursday, investors remained focused on the likely winners and losers from AI. Major stock indexes DJIA SPX COMP finished mostly lower.
-Vivien Lou Chen
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
02-26-26 1638ET

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The 10-year Treasury yield has dropped to a three-month low, influenced by concerns over AI's potential impact on U.S. jobs. This has led to increased buying in the bond market, with yields falling despite stable economic conditions. The 10-year yield finished below 4.02%, while the 30-year bond yield fell below 4.7%. The decline in yields is attributed to fears of job displacements due to AI, affecting mortgage rates and overall market sentiment. Investors are weighing the implications of AI on inflation and employment.

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10-year Treasury yield hits a three-month low - and it may have to do with AI, strategist says