U.S. Treasury yields pared early gains after a strong 10-year note auction on Wednesday, while European government debt kept selling off. French yields resumed their climb after a brief Tuesday reprieve, and British 30-year gilt yields hit levels not seen since 1998.
The 10-year U.S. Treasury yield rose 1.8 basis points to close at 5.286%, while the 30-year yield climbed 3.2 basis points to 5.673%. Both had earlier surged as much as 9.5 and 8.7 basis points, respectively, before a $39 billion 10-year note auction traded through with the highest yield for such a sale since November 2000, a sign of strong demand that helped cap the advance. Traders also digested the Federal Reserve's September meeting minutes, which showed most participants expected another interest rate increase would likely be appropriate by year end.
France's respite fades as spreads widen again
Across the Atlantic, the relief in French sovereign paper proved short-lived. The French 10-year OAT yield rose to 4.819%, reversing Tuesday's brief breather, while the French two-year yield climbed to 3.576% as investors stayed cautious on Parisian risk. Germany's bonds, by contrast, held steady: the 10-year Bund yield stayed around 3.50% and the two-year held flat at 3.088%, reflecting continued safe-haven demand.
Budget proposals have yet to ease fiscal worries
French borrowing costs have climbed in recent sessions on concerns about the country's public finances and political uncertainty ahead of the coming presidential election. Yields eased briefly on Tuesday after far-right leader Marine Le Pen unveiled a budget plan aiming to cut France's deficit to 3% of GDP by 2030 through €140 billion in net spending cuts. Yet trading desks remain skeptical the plan can pass. With France's deficit projected to reach 5.4% of GDP in 2026, well above the European Union's 3% limit, investors are still demanding a premium to hold French debt over German benchmarks.
UK 30-year gilt yield hits highest since 1998
In the United Kingdom, the 30-year gilt yield climbed to its highest level since January 1998, a day after Chancellor of the Exchequer John Healey met with the primary dealers who make markets in UK government debt. According to the UK Treasury: "The Chancellor made clear that he would be in listening mode", with the meeting also touching on geopolitical developments and financial market conditions. The Treasury statement added that Healey reaffirmed the government's commitment to its fiscal rules and to delivering economic stability.
Source: Investing.com
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