Long-end U.S. Treasury yields hit fresh 24-year highs, while in Europe, the 10-year French-German bond yield spread hit its widest level in 14 years as the selloff in global bond markets ramped up. U.S. Treasury yields have been swinging between relief and fresh highs since Wednesday’s lower-than-expected U.S. PCE inflation data for August and an upward revision to second-quarter GDP data that underpinned the resilience of the U.S. economy. Investors remain focused on inflation, the fiscal deficit, Treasury supply and term premium, or the additional yield investors demand to buy a long-dated bond rather than a short-dated one. “The ‘higher for longer’ rate environment has become ‘much higher for a lot longer’,” said Jo Anne Bianco, senior investment strategist at Bond Bloxx Investment Management, in a note. The 10- and 30-year U.S. Treasury yields climbed to 24-year highs of 5.342% and 5.683%, respectively, according to Tradeweb.
The 10-year German Bund yield rose 5.5 basis points at 3.633%, near the 3.653% level it reached earlier this week, the highest since mid-2009. European investors’ focus is also on French government bonds, where budget concerns weigh on investors’ confidence, pushing the 10-year OAT-Bund yield spread to 132 basis points, a 14-year high. “Bonds remain choppy and OAT spread dynamics are concerning,” said Erik Liem, rates strategist at Commerzbank. “The French budget proposal looks set to add some fundamental spice to the current dynamics.” France’s Budget Act for 2027 is scheduled to be presented on Thursday, with a public deficit target of 5.0% of gross domestic product. Long-dated Treasury yield levels above 5% are both a warning and an opportunity, said Mark Malek, CIO at Siebert Financial. “Existing bondholders have absorbed painful price declines, but new capital can now lock in yields unavailable for much of the past two decades,” he said.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing