U.S. Treasury yields were largely unchanged on Monday, holding near multi-decade highs as investors weighed softer U.S. labor data against persistent fiscal concerns in Europe and geopolitical tensions in the Middle East.
The benchmark 10-year U.S. Treasury yield was flat at around 5.276%. It remained close to its highest level since 2007 following a sharp sell-off during the third quarter.
Meanwhile, the two-year Treasury yield edged lower to approximately 4.818%.
Fed Rate Pause Expectations Support Short-Term Treasuries
Shorter-term U.S. yields came under slight pressure as investors increased expectations that the Federal Reserve could leave interest rates unchanged at its next policy meeting.
Those expectations strengthened after Friday’s weaker-than-expected nonfarm payrolls report.
The softer labor market data reduced the likelihood of an immediate rate increase and encouraged traders to reassess the near-term outlook for U.S. monetary policy.
French Bond Yields Retreat After Sharp Sell-Off
European bond markets showed signs of stabilization after a dramatic sell-off in French government debt.
The earlier turmoil had also affected currency markets, pushing the euro to a 17-month low against the U.S. dollar.
France’s two-year government bond yield fell back to around 3.666% after surging nearly 76 basis points earlier in the session and briefly reaching 4.467%.
The benchmark French 10-year OAT yield also eased to approximately 4.834%.
Earlier, it had traded near levels not seen since 2002, climbing above 4.96%.
French Fiscal Risks Remain in Focus
Despite the pullback in yields, concerns about France’s fiscal position remain elevated.
Five-year French government bonds continued to face selling pressure, extending their decline for a ninth consecutive session.
The cost of insuring French sovereign debt against default also rose sharply.
Five-year French credit default swaps traded near 87 basis points, their highest level since 2013.
The move reflects growing investor concerns over France’s ability to manage its fiscal position and navigate its proposed 2027 budget.
German Bunds Benefit From Safe-Haven Demand
The pressure on French bonds has highlighted increasing fragmentation within Eurozone debt markets.
Investors have moved capital toward safer German government bonds as they reduce exposure to riskier European debt.
Germany’s 10-year Bund yield remained close to one-month lows after touching around 3.475% late last week.
The two-year German yield also held near 3.01%.
Demand for German debt has increased as investors search for higher-quality assets during the latest period of market uncertainty.
Eurozone Data and ECB Comments Shape Bond Markets
Investors also assessed new economic data from the Eurozone.
The latest composite PMI figures showed that business activity expanded at its fastest pace in nearly three and a half years.
At the same time, European Central Bank Chief Economist Philip Lane warned that higher energy prices could increase inflation risks.
However, he also noted that elevated borrowing costs and reduced government spending support could weigh on economic growth.
These conflicting pressures continue to complicate the outlook for European interest rates and government bond markets.
Bond Markets Remain Sensitive to Fiscal and Monetary Risks
Global bond markets remain focused on a combination of monetary policy, fiscal concerns and geopolitical developments.
U.S. Treasury yields remain historically high, while investors continue to assess whether weaker economic data will encourage the Federal Reserve to pause further rate increases.
In Europe, French fiscal uncertainty remains a major source of volatility, even as government bond yields begin to retreat from their recent highs.
