U.S. Treasury Yields Hit New 24-Year Highs; French Bonds Underperform on Budget Worries — 3rd Update

By Emese Bartha and Paulo Trevisani

Yields on U.S. and European government bonds rose as the global bond selloff resumed.

Treasury yields reached highs not seen in more than 24 years. The 10-year traded as high as 5.361%, the highest intraday level since April 2002, according to Tradeweb. The 30-year touched 5.730%, highest since May 2002. The two-year hovered near a 2024 high, at 4.954%.

Danske Bank analysts see a risk of further pressure on long-dated Treasurys.

"The pressure is on the long end of the U.S. Treasury curve given not only supply of Treasurys but also from the hyperscalers," Jens Peter Sorensen, chief analyst at Danske, said in a note. "We do see the risk of 10-year and 30-year Treasurys hitting 6% as investors demand a higher premium for the long end," he said.

Investors waited for a $39 billion auction of 10-year Treasurys. High yields have drawn buyers in recent tenders, as Washington's borrowing costs skyrocketed.

Attention also turned to minutes of the Federal Reserve's September meeting, when it raised interest rates for the first time in three years. The Fed is expected to keep rates on hold this month, although inflation data due next week could change the outlook.

"Persistent U.S. inflation, resilient activity, and fiscal headwinds have led markets to price a higher path for policy rates," State Street Investment Management said in a note. "While rising prices, higher borrowing costs, and geopolitical uncertainty continue to create challenges, economic growth has remained surprisingly resilient," it said.

"Together, sticky inflation and resilient economic growth point to the potential for further upward pressure on rates."

Market expectations for another Fed rate increase in October have fluctuated since then. Markets currently assign a 22% probability to a rate increase this month, down sharply from around 70% at the beginning of last week, although several rate increases are still expected over the coming year, according to LSEG data.

Geopolitics also remains a focus for global bond markets after Iran intensified attacks on tankers in the Strait of Hormuz in recent days, driving oil prices higher. Brent crude oil was up 1.3% at $101.9 a barrel.

"Clearly, the overhang of the geopolitical landscape and the subsequent, associated, elevated nature of price pressures and the push higher in government bond yields, are continuing to weigh on sentiment and generic risk appetite," Simon Ballard, chief economist at First Abu Dhabi Bank, said in a note.

France's budget talks, and accompanying nationwide protests in the country stir nerves in Europe, leaving French government bonds, or OATs, yet again underperformers in the eurozone.

The 10-year French OAT yield rose 17 basis points to 4.923%, while the 10-year German Bund yield was up 3.3 basis points to 3.507%.

"France is quickly becoming the focus of the European bond selloff," Mitch Reznick, head of cross-border credit at Federated Hermes Limited, said in a note.

The 10-year OAT-Bund yield spread was last at 139 basis points, staying below Friday's peak just shy of 159 basis points, according to Tradeweb.

"The velocity of the move matters," Reznick said. Investors are abandoning French government bonds for quality in German Bunds, which is magnifying the spread of the two wider.

In an interview with The Wall Street Journal, France's Finance Minister Roland Lescure said the government is prepared to exercise special constitutional powers and circumvent parliament to pass billions in spending cuts if negotiations stall over the 2027 budget. He also said he was willing to negotiate on all aspects of the budget, but he has two red lines - sticking to a maximum budget deficit of 5% of gross domestic product and avoiding any changes that hurt growth.

Opposition far-right leader Marine Le Pen's proposal for a "golden rule" debt brake and 140 billion euros ($157.65 billion) in savings by 2032 "directionally targets fiscal discipline, yet implementation faces steep constitutional hurdles," Patrick Munnelly, market strategist at Tickmill Group, said in a note.

Write to Emese Bartha at emese.bartha@wsj.com and Paulo Trevisani at paulo.trevisani@wsj.com

(MORE TO FOLLOW) Dow Jones Newswires

October 07, 2026 10:14 ET (14:14 GMT)