Treasury, Eurozone Bond Yields Fall to Multiweek Lows as U.S. Inflation Shock Fades — Update

By Emese Bartha

Ten-year Treasury and German Bund yields slid to multiweek lows in early European trade on Thursday as bond investors absorbed higher-than-expected U.S. inflation data that had prompted a temporary but sharp bond selloff on Wednesday.

Ten- and 30-year U.S. Treasury yields fell to three-week lows of 5.087% and 5.431%, respectively, while the 10-year German Bund yield hit a two-week low of 3.382%, according to Tradeweb data.

Falling oil prices also helped Treasury yields decline and so did pressure on global equities, especially in the chip sector. December Brent crude futures fell 2% to $103.95 a barrel.

"Bonds rallied as risk appetite deteriorated," said Patrick Munnelly, market strategist at Tickmill Group, in a note.

Munnelly added that oil remains a central macro risk, keeping central banks cautious.

U.S. CPI inflation data boosted market expectations of a Federal Reserve interest-rate hike at the Oct. 28 meeting, pushing bets of a hike briefly to 49% from 22% before the data, according to LSEG. Expectations of monetary tightening have since receded, and money markets currently price in a 29% probability of a 25-basis-point rate rise this month.

"The market reacted as if stung by a bee," KBC Bank analysts said in a note, referring to Wednesday's surge of up to 15 basis points in Treasury yields alongside the sharp increase in Fed rate-hike bets.

"The latest [CPI] report complicates the Fed's decision this month, as the road back to price stability is looking increasingly difficult to navigate," said Jeffrey Roach, chief economist for LPL Financial.

U.S. consumer prices rose 3.7% from a year earlier, accelerating from August's 3.4% gain and above consensus estimates of a 3.6% increase in a Wall Street Journal survey. The core reading, which strips out volatile food and energy prices, was also higher than forecast.

"The resilience of the U.S. economy raises the possibility that the neutral policy rate is higher than previously assumed," said Julia Hermann, global market strategist at New York Life Investment Management. "But further increases in yields could begin to challenge the very growth resilience that has allowed markets to absorb tighter financial conditions."

"The market's sweet spot depends on higher rates remaining a reflection of economic strength," she said.

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

(END) Dow Jones Newswires

October 15, 2026 05:00 ET (09:00 GMT)