Yields on Treasurys, European Government Bonds Edge Higher as Stocks Recover — Update

By Emese Bartha and Jessica Fleetham

Yields on U.S. Treasurys and European government bonds edged higher on Friday, pulling away from multiweek lows reached the previous day as equities rebounded following a selloff in technology stocks.

Still, increases in yields were limited. Investors have turned their attention away from concerns about inflation and risks of higher interest rates and instead focused on the economic impact of high borrowing costs and the sustainability of debt-funded AI investments.

The 10-year Treasury yield was last up 0.9 basis points at 5.094%, while the 30-year yield rose 0.9 basis points to 5.437%, according to Tradeweb. On Thursday, they fell to three-week lows of 5.037% and 5.379%, respectively.

The 10-year German Bund yield was 1.5 basis points higher at 3.419%, having hit a five-week low of 3.352% on Thursday.

Bond markets face a "rollercoaster ride" of "one step forward, one step back," pulled by changes in oil prices and risk sentiment, Commerzbank rates strategists said in a note.

The pan-European Stoxx Europe 600 index gained 0.6% to 643.85 while U.S. stock futures were slightly higher.

Since bond yields globally hit multiyear highs earlier this month, investors have been tempted back into buying government bonds again, particularly given concerns about the sustainability of the AI trade.

"U.S. Treasury yields may have reached levels where their elevated levels weigh on risk sentiment," said Jussi Hiljanen, chief rates strategist at SEB.

Investors are also starting to question whether interest rates will rise as much as markets are currently anticipating. Money markets currently price in up to three rate increases by the Federal Reserve and European Central Bank over the next year, and four by the Bank of England, LSEG data showed.

U.S. rates markets are grappling with two key questions--whether the market is pricing in too many interest-rate hikes over the next year and whether bond yields have peaked, Societe Generale rates strategists said in a note.

The risk of energy prices staying elevated and keeping inflation high remains a concern for bond investors, however.

Going forward, inflation remains the pivotal variable for markets because it will influence both the direction of monetary policy and the path of government bond yields, said Laura Lake and Tim Crawmer, senior strategists at Payden & Rygel, in a note.

"If inflation cools more decisively, bonds could deliver price appreciation in addition to income," they said.

Oil prices edged lower on Friday, albeit remaining at high levels, tempering inflation concerns for now. Front-month Brent crude traded down 0.7% at $105.17.

Write to Emese Bartha at emese.bartha@wsj.com and Jessica Fleetham at jessica.fleetham@wsj.com

(END) Dow Jones Newswires

October 16, 2026 05:45 ET (09:45 GMT)