Eurozone government bond yields and U.S. Treasury yields moved higher on Tuesday. Investors prepared for the release of the Federal Reserve’s June meeting minutes, while stronger Eurozone investor sentiment reduced demand for safe-haven bonds.
As bond prices fell, yields moved higher across the curve. The benchmark 10-year U.S. Treasury yield rose to 4.49%. Meanwhile, the policy-sensitive two-year Treasury yield climbed to 4.13%.
Markets Focus on the “Warsh Minutes”
The main focus for investors is Wednesday’s release of the Federal Reserve’s June 16–17 policy meeting minutes.
The minutes will give markets their first detailed look at the Federal Open Market Committee’s thinking under newly appointed Fed Chair Kevin Warsh.
At the June meeting, the Fed left interest rates unchanged at 3.50%–3.75%. However, the Summary of Economic Projections surprised markets with a more hawkish tone than expected.
Weak Jobs Data Had Briefly Pressured Yields
Earlier in the week, bond yields had moved lower after weaker U.S. labor market data.
Non-farm payrolls showed that the U.S. economy added only 57,000 jobs in June. That was well below market expectations of 115,000.
The disappointing jobs report initially supported bonds. However, attention quickly shifted back to the Fed minutes and the possibility of a tougher policy message.
German Bond Yields Also Move Higher
European bond markets followed the same direction.
Germany’s benchmark 10-year bund yield rose to 2.948% in afternoon trading. The two-year German yield, which is closely tied to European Central Bank rate expectations, also moved higher to 2.54%.
The selloff in fixed-income markets gained momentum after the latest Sentix index showed a much stronger-than-expected rebound in Eurozone investor confidence for July.
ECB Comments Add More Pressure
Comments from European Central Bank policymaker Fabio Panetta also added pressure to bond markets.
Speaking at an industry event, the Bank of Italy governor warned that European central banks may face growing long-term political pressure. He said governments could increasingly look to central banks to absorb heavier deficits linked to aging populations and industrial subsidies.
Investors Rotate Away From Safe-Haven Bonds
The brighter outlook, especially for Germany’s industrial sector, encouraged investors to move away from government bonds.
Instead, markets showed renewed interest in riskier assets such as equities. This shift added further pressure on bond prices and helped push yields higher.
Overall, investors are waiting to see whether the Fed minutes confirm a more hawkish policy stance. If they do, Treasury yields and Eurozone bond yields could remain under upward pressure.
