Treasury, Eurozone Yields Fall as Markets Look to U.S. Inflation Data — Update

By Emese Bartha

U.S. Treasury and eurozone government bond yields fell in European trade on Tuesday, helped by lower oil prices and a pullback in AI stocks.

The 10-year Treasury yield dropped 5.5 basis points to 5.189%, while the 30-year Treasury yield declined 5.1 basis points to 5.547%, according to Tradeweb. They are now comfortably below the 24-year highs of 5.365% and 5.733% reached last week.

The German 10-year Bund yield fell 3.7 basis points to 3.437%, while the French 10-year OAT slightly outperformed, with its yield retreating 5 basis points to 4.850%.

"This combination of easing risk appetite and fading inflation concerns from the commodity (oil) side of the equation has created a fillip for government bonds," said Simon Ballard, chief economist at First Abu Dhabi Bank, in a note.

Market participants are focused on U.S. consumer price inflation data for September due Wednesday as a key input ahead of the Federal Reserve's next interest-rate decision on Oct. 28. For that meeting, markets currently price in a low 19% probability of a rate rise even as a total of three hikes are fully priced over the next 12 months, according to LSEG.

A Wall Street Journal poll of analysts predicts headline CPI in September will rise 3.6% compared with the same period a year earlier, after August's 3.4% increase.

An anticipated acceleration in September consumer inflation is unlikely to prompt the Fed to raise rates in October, said Thierry Wizman, global FX and rates strategist at Macquarie Group, in a note.

"We do not believe that the report will sway the Fed into hiking later this month," he said.

Analysts also see tentative signs that the recent selloff in U.S. Treasurys might cool.

DZ Bank analysts estimate that the term premium on the 10-year U.S. Treasury yield is 91 basis points, in line with the average level since the early 1990s but also the highest level since 2014. The term premium is the additional yield investors demand for buying a longer-dated bond versus a shorter-dated one.

Together with the anticipated scaling back of markets' elevated interest-rate expectations, this limits scope for any further rises in yields, they said.

Still, in Europe, French fiscal risk is returning to investors' radars, said Patrick Munnelly, market strategist at Tickmill Group, as the National Assembly begins debating tax measures in the 2027 budget.

"France's challenge is that the political process remains fraught, and even the current budget path only brings the deficit down to around 5% of GDP, still a high level for a large eurozone sovereign," he said.

"The key market question is whether French spread widening could eventually trigger European Central Bank intervention via the Transmission Protection Instrument." For now, however, the bar for that looks high, Munnelly said.

"There is a strong case that wider French spreads reflect fundamentals: elevated deficits, political uncertainty and weak fiscal credibility. That is different from disorderly or unwarranted market conditions detached from underlying economics."

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

(END) Dow Jones Newswires

October 13, 2026 05:09 ET (09:09 GMT)