French Bond Yields Hit Multiyear Highs, U.S. Treasury Yields Edge Higher — 2nd Update

By Emese Bartha and Jessica Coacci

Yields on eurozone government bonds rose while the French 10-year bond yield hit its highest level since July 2002 as inflation, budget and debt risks lingered on both sides of the Atlantic.

The France 10-year yield closed at 5.009%, up 0.086 percentage points. French borrowing costs rose as high as 5.022%, the highest intraday yield since July 2002 on Wednesday.

The National Assembly, the lower house of France's parliament, postponed a vote on the revenue section of the 2027 draft budget bill originally scheduled for Tuesday, according to the Assembly's official TV channel.

"We thus see little reason to turn optimistic on France," Commerzbank rates strategist Erik Liem said in a note, citing the budget delay and the large spread between 10-year French and German government-bond yields. The German 10-year yield closed at 3.415%. The spread between the two is 159.38 basis points, according to LSEG data.

Yields on 10-year U.K. government bonds, or gilts, traded around 5.3909% Wednesday. Higher-than-expected inflation data increased expectations that the Bank of England would raise interest rates by a quarter point in November.

The macroeconomic backdrop for global government bond markets hasn't changed in recent days, although investors are increasingly alert to the economic impact of high borrowing costs. There was little U.S. economic data for bond investors to digest. However, weak U.S. housing data on Tuesday caused long-dated yields to retreat.

Treasury yields overall remained little changed after Wednesday's 20-year bond auction met softer-than-expected demand. The Treasury sold $13 billion in bonds at a high yield of 5.469%-the highest clearing yield since January 8, 1986. The Treasury resumed issuing 20-year bonds in May 2020 after discontinuing them in 1986.

On Wednesday, the 10-Year yield rose 0.029 percentage point to 5.145%. The 2 Year yield rose 0.038 percentage point to 4.823%, the largest 1 day yield gain since September 28. The 30 Year yield rose 0.012 percentage point to 5.437%.

As investors scale back some of their expectations for the Federal Reserve's interest-rate path, Treasury yields continued to hover comfortably below their recent multidecade highs. Money markets price in an 85% probability of unchanged rates at the Fed's Oct. 28 decision, although three hikes are fully priced in over the next 12 months, according to LSEG.

Still, Treasury yields remain at levels that look attractive for medium-term investors, analysts said.

"For medium-term investors, current yield levels offer attractive carry and a favorable asymmetry in expected returns," with positive outcomes outweighing negative ones, said Luca Cazzulani, head of strategy at the Investment Institute by UniCredit.

Investors with a shorter investment horizon, however, should maintain a cautious stance on duration risk given still-elevated rate volatility, Cazzulani said.

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

(END) Dow Jones Newswires

October 21, 2026 16:32 ET (20:32 GMT)