Treasuries Soar as Tech-Stock Selloff Lures Investors to Havens
By Saghir Hussain ·
US tech giants are dumping shares and British borrowers are about to feel the pinch.
Yields on UK gilts dropped sharply overnight as a brutal selloff in American AI stocks sent global investors scrambling for safety. The 10-year gilt yield fell 12 basis points to 4.18% in early London trading — its biggest single-session move since the mini-Budget — after Microsoft, Meta, Micron and Sandisk shed a combined $340 billion in market value across two sessions.
The Selloff
Wall Street’s mood shifted decisively after the US midterm elections delivered a divided Congress, raising immediate doubts about the scale of future AI infrastructure spending. "Investors don't like uncertainty," said a senior equity strategist at a City firm. "The narrative was unlimited capex. Now it's 'show me the return'."
Microsoft slipped 6.2% on Thursday after signalling slower data centre growth in 2025. Meta fell 5.8% after warning that Reality Labs losses would "increase meaningfully." Micron and Sandisk, bellwethers for AI memory demand, dropped 9% and 11% respectively. Propel Holdings, a smaller AI infrastructure play, tumbled 14%.
George Colony, chairman of Forrester Research, told Bloomberg the long-term AI investment thesis remains intact. "This is a pause, not a pivot," he said. "But the market is pricing a pause as a reversal."
What It Means for UK Borrowers
The flight to safety has immediate consequences for British households and firms. Lower gilt yields typically feed through to cheaper fixed-rate mortgages and business loans — but with a lag, and only if the Bank of England doesn't counteract the move.
Threadneedle Street meets next Thursday. Governor Andrew Bailey has already warned that "financial stability risks remain elevated." A sustained drop in long-term yields could complicate the MPC's calculus if it loosens financial conditions while inflation in services remains sticky at 5.6%.
For a first-time buyer in Middlesbrough or a café owner in Swansea, the transmission is opaque. "We don't set mortgage rates in New York," said a broker in Leeds. "But when US Treasuries rally, UK swap rates follow. That eventually hits the High Street."
Small businesses relying on asset-based lending or invoice finance — sectors heavily exposed to swap curves — may see marginal relief in three to six months. Provided the selloff doesn't trigger a credit crunch in US regional banks, which remain heavy holders of commercial real estate debt.
The AI Reality Check
Beneath the market mechanics lies a harder question: was the AI buildout ever sustainable at this pace? UK data centre operators in Slough, Manchester and Newcastle have been expanding on the assumption of insatiable hyperscaler demand. Microsoft alone had planned £2.5 billion of UK infrastructure investment by 2027.
If that pipeline slows, the ripple reaches construction firms in the North West, power grid contractors in Scotland, and the apprenticeship programmes tied to them.
The Treasury will be watching closely. Rachel Reeves has made "securonomics" — domestic resilience in critical infrastructure — a pillar of her growth strategy. A US-driven AI winter would test that framework faster than any White Paper.
Markets hate uncertainty. But so do the plumbers, coders and shopkeepers who build the real economy. When Silicon Valley sneezes, does Britain still catch a cold — or have we finally learned to wear a mask?