U.S. Treasury Yields Retreat From Early Highs; Eurozone Bond Yields Remain Elevated — Update

By Emese Bartha and Jessica Coacci

U.S. Treasury yields retreated from session highs Thursday following a steady auction of longer-dated securities and a Treasury buyback operation.

The 10 Year yield declined 0.049 percentage point to 5.232%, while the 30-year Treasury declined 0.055 percentage point to 5.606%. The 30-year traded as high as 5.7315%, while the 10-year Treasury yield traded as high as 5.353% Thursday. The 2-year yield declined 0.008 percentage point to 4.753%.

Meanwhile, bond investors still showed a steady appetite for longer run securities. The Treasury's monthly auction sold $22 billion in 30-year bonds, with a high yield of 5.618%. That was the highest level since August 10, 2000, which had a high yield of 5.697%.

"The auction essentially stopped on the screws. The bid to cover ratio was above average. All in all, it was a good auction," said John Canavan, Lead Analyst at Oxford Economics.

In addition, the U.S. Treasury accepted the maximum of $6 billion in a buyback operation of 20- to 30-year bonds.

Investors are divided over whether U.S. Treasury yields have room to rise further or could start falling soon.

The current high U.S. Treasury yield levels reflect economic resilience, high inflation, fiscal concerns, and public and private sectors competing for investors. Federal Reserve Bank of St. Louis President Alberto Musalem said U.S. interest rates may need to climb for the next six to nine months to subdue inflation, setting a tentative timeline for further monetary tightening. Earlier in the day, Fed governor Chris Waller said there is some flexibility about the timing of future rate hikes.

Higher U.S. Treasury yields reflect an economy that has remained resilient, inflation that is still above target, and a fiscal backdrop that requires substantial Treasury issuance, said JoAnne Bianco, senior investment strategist at BondBloxx Investment Management, in a note.

"Investors should probably expect a higher rate environment than what prevailed during the decade following the Global Financial Crisis," she said. However, if growth moderates and inflation were to ease, yields could move lower, she added.

Benchmark Brent crude prices rose 4% to $104.28 their highest close since September on a fresh tanker attack in the Persian Gulf. Oil prices fell from their daily highs after President Trump posted on social media that the U.S. is having "productive discussions" with Iran and won't attack the country prior to the midterm elections.

Elsewhere in global markets, French government bonds continued to underperform eurozone peers as investors remained cautious about French debt on concerns over the government's ability to lower the budget deficit to the intended 5% of gross domestic product in 2027.

The French 10-year yield ended at 4.8965%, and traded as high as 4.9685%, while the 10-year German Bund yield hovers around 3.4937%.

In the eurozone, France's fiscal situation has reached a critical point, said Eckhard Schulte, chairman of the board at MainSky Asset Management, in a note. "Given the current combination of nominal growth and interest costs, France's mountain of debt is growing by around 8% annually," he said. "If this trend continues, the debt-to-GDP ratio is likely to hit the 130% mark by the end of 2027."

Write to Emese Bartha at emese.bartha@wsj.com and Jessica Coacci at jessica.coacci@wsj.com

(END) Dow Jones Newswires

October 08, 2026 16:30 ET (20:30 GMT)