Treasury Yields Soar as AI Trade Falters and Modena Breaks Out

The bond market set the tone for the week, with the 30-year Treasury yield reaching its highest level since 2007 and the 10-year yield at its highest since January 2025. This was largely due to fading hopes of a US, Iran resolution, which lifted oil prices and made investors nervous about the sheer volume of long-dated supply competing for capital.

The S&P 500 fell for a third straight session on Tuesday, with the Philadelphia semiconductor index tumbling 5% as investors fled the AI trade. The Nasdaq also declined 1.3%. Wednesday's session saw more heavy losses for AI names, but yields fell briefly after the US Treasury announced it would double the size of its buyback operations in longer-dated debt.

However, this reprieve was short-lived, and treasury yields reversed course on Thursday afternoon. Stocks were largely negative by the time US markets opened. The week's other big story was in healthcare, where Moderna and Merck announced that their personalised mRNA cancer vaccine met its main goals in a Phase 3 melanoma trial.

Moderna rose about 177% in a single session, with Merck adding 12%. Analysts predict peak annual sales above $6bn for melanoma alone. Moderna has lung, kidney, and bladder trials coming up, all utilizing the same personalised mRNA mechanism to target highly responsive tumours.

The US Treasury's debt has reached a record high, crossing the $40trn mark with $3trn added in the last year alone, the fastest pace ever outside of the pandemic years. Buybacks seem insufficient to temper worries about the sheer size of the debt.