U.S., European Government-Bond Yields Fall, Remain Near Recent Highs -- Update

By Emese Bartha

U.S. Treasury yields reversed course and declined in early European trade, while eurozone government bond yields also fell as the rise in oil prices slowed slightly.

Still, Treasury yields remained close to Monday's multiyear peaks as the stalemate between the U.S. and Iran surrounding the terms of reopening the Strait of Hormuz continued, even as a growing number of tankers are crossing the waterway.

The 10-year Treasury yield fell 1.4 basis points to 5.227%, hovering close to Monday's peak of 5.274%--the highest level since June 2007, according to Tradeweb. The 30-year Treasury yield edged down 1.8 basis points to 5.544%, staying below Monday's peak of 5.583%--a level last seen in 2002. The 10-year German Bund yield fell 3.6 basis points to 3.610%.

Notwithstanding the current decline, yields remain high.

Yields remain under upward pressure from energy prices "as the U.S. and Iran appear to be stuck in their negotiations," Antti Ilvonen, senior fixed income and FX analyst at Danske Bank, said in a note.

High oil prices are fueling market expectations of further interest-rate hikes by the Federal Reserve following one earlier in September. Money markets currently price in 100 basis points of Fed rate hikes over a 12-month horizon, according to LSEG.

Front-month Brent for November was last up 1% at $106.35 a barrel.

Analysts say high yields also reflect the strength of the U.S. economy.

"The surge in the 10-year Treasury yield to approximately 5.25% reflects higher oil prices and a strong U.S. economy more than AI debt issuance or fiscal concerns," said James Reilly, senior markets economist at Capital Economics.

Eurozone bond yields cannot take much comfort either from flash estimate data showing Spanish annual inflation at a three-and-a-half-year high of 5.0% in September, up from 4.6% in August.

The current yield levels suggest to some market participants that the bond selloff has potentially gone too far.

Ten- and 30-year U.S. Treasury yields around multi-decade highs "could attract investors as fixed income becomes increasingly competitive with equities as a source of capital for the insatiable appetite of AI demand," said Richard Hunter, head of markets at Interactive Investor.

J.P. Morgan strategists described 30-year Treasurys as "oversold," though they are wary that the trend for higher yields could continue.

"We are now left waiting for renewed evidence that would suggest the market is starting to respond to those conditions after we were stopped out of our long trade last week," they said in a note.

Write to Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

September 29, 2026 04:18 ET (08:18 GMT)