Bond Rally Stalls as Rising Risk Appetite Erodes Haven Demand

James Hirai and Ye Xie

Thu, February 26, 2026 at 2:49 AM GMT+9 2 min read

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Photographer: Stefani Reynolds/Bloomberg

(Bloomberg) – Treasuries and the dollar retreated as demand for haven assets ebbed amid revived risk appetite that sent technology stocks higher.

US 10-year yields rose to 4.04%, while the greenback fell for the first time this week as investors pushed the tech-heavy Nasdaq 100 higher.

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Treasuries — particularly longer-dated bonds — have benefited over the past month from several factors, including investor anxieties about artificial intelligence-driven disruption, a sharp rally in Japanese government bonds and mixed US economic data. But with 10-year yields hovering near the key 4% level — close to a three-month low — investors may need fresh catalysts to extend the rally amid a stable labor market, elevated inflation and renewed uncertainty over US trade policy.

“It seems like the market is a bit stuck in the mud,” said Zachary Griffiths, head of investment grade and macro strategy at CreditSights.

A test of bond demand will come when the Treasury sells $70 billion of new five-year notes at 1 p.m. in New York, following Tuesday’s solid two-year offering.

Traders are betting that the Fed is likely to hold rates steady until at least when central bank Chair Jerome Powell’s term ends in May. Interest-rate swaps tied to Fed policy meetings show about a 50% probability of a quarter-point cut by June. They have fully priced in roughly two cuts by December, with the possibility of a third reduction has all but vanished.

Some Fed officials cautioned against near-term policy easing. Boston Fed President Susan Collins said Tuesday that interest rates are likely to stay unchanged “for some time” as recent economic data show an improvement in the labor market, while risks to inflation remain. Also on Tuesday, Federal Reserve Governor Lisa Cook warned the US central bank may not be able to offset rising unemployment driven by adoption of artificial intelligence.

Attention will turn to Nvidia Corp.’s latest quarterly results scheduled for after the market close on Wednesday. Investors are waiting for fresh evidence that the AI spending boom remains on track.

“With 10-year Treasury yields so close to the 4% psychological level, I see better value in fading any bid if it emerges,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.

(Recasts with updated prices.)

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