Treasury Yields Fall on String of Weak Housing Data; French Bonds Remain Near Multiyear Highs — 3rd Update

By Emese Bartha and Jessica Coacci

Treasury yields edged lower after a string of weaker-than-expected housing reports highlighted the strain of elevated mortgage rates.

The pending home sales index, a leading indicator of house sales based on contract signings, recorded its lowest reading since its establishment in 2001, falling 7.3% in September to 66. .

Housing starts slipped 5.2% to 1.221 million last month as home-building activity declined. Economists polled by The Wall Street Journal expected a reading of 1.3 million and for starts to rise 2% over the month.

The U.S. 10-year fell to 5.123% and traded as low as 5.078%. The U.S. 2 year yield hovers around 4.791%. The 30-year Treasury yield hovers around 5.433%.

In global bond markets French government bond yields dipped from their highs in midday trading as investors remained cautious amid budget talks in the National Assembly.

The 10-year French OAT yield slipped 0.23 basis points to 4.9231%, while the 10-year German Bund yield declined 5.92 basis points to 3.3936%, according to LSEG data. The spread between them widened 152.95 basis points.

"While renewed hopes of a peace in the Middle East and lower energy prices have brought some relief to government bond markets today, the widening of the spread between French sovereign bonds and those in the rest of the euro-zone probably has further to run over the coming months," Capital Economics' chief markets economist Jonas Goltermann wrote.

Nationwide protests and budget problems in France are a reminder of global debt problems.

"The public unrest certainly does not support OAT sentiment, and the last few days underscore how difficult it will be for any French government to strike a balance between the pressure from the markets (calling for more austerity) and the pressure in the streets (calling for more spending)," Commerzbank rates strategist Christoph Rieger said in a note.

"Latest dynamics show signs of global, not just French debt crisis," Rieger said.

Risk premium for French OATs is in uncharted territory, Citi rates strategist Jamie Searle said in a note.

"As such, there is no obvious anchor level, and sentiment is in the driving seat," he said.

France's National Assembly is scheduled to vote on the revenue section of the 2027 draft budget bill. The country's budgetary process looks even more fraught following the scale of the weekend's social unrest, Searle said.

Spillover risks from France warrant close attention and further volatility in bond markets is possible, the BlackRock Investment Institute said in a note. However, the current situation is "materially different" from the 2011-2012 eurozone debt crisis, its strategists said.

"France's government debt has surged from roughly 89% of gross domestic product in 2011 to around 119% today, while the euro area's aggregate debt ratio is now back at its 2011 level of around 89%," BlackRock Investment Institute said.

"The region is also better equipped to weather financial stress, with stronger banks and more powerful European Central Bank tools, though intervention isn't guaranteed."

Still, BlackRock stays neutral on eurozone government bonds and prefers opportunities elsewhere.

In the U.S., the market's near-term focus is on the Fed's rate decision on Oct. 28. Money markets price a high 83% probability of the Fed keeping the fed funds target rate range unchanged at 3.75%-4.00%, according to LSEG.

Recent Fed communication reinforces Deutsche Bank analysts' baseline forecast for a quarterly pace of rate hikes through March, rather than a more accelerated sequence, they said in a note.

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

(END) Dow Jones Newswires

October 20, 2026 15:01 ET (19:01 GMT)