Treasury Yields Turn Higher, Eurozone Bond Yields Drop — Update

By Emese Bartha

Treasury yields turned higher on Friday ahead of October U.S. jobs data while German bond yields remained near earlier multimonth lows as safe-haven buying accelerated amid a rout in tech stocks following the Democrats' sweep of Congress in the midterm elections.

The prospect of political gridlock has been broadly welcomed by bond investors as a Republican presidency pitted against a Democratic Congress could curb fiscal spending. Meanwhile, expectations of greater AI regulation prompted selloffs in tech-related stocks in Asia, increasing demand for safe-haven assets, although Nasdaq futures have started to recover some ground.

"The decline in U.S. Treasury yields during the artificial-intelligence-led selloff reinforces our September argument that policy-rate expectations, rather than issuance, are their primary cyclical driver," said Afonso Borges, fixed income analyst at Julius Baer, in a note.

The 10-year Treasury yield last traded 1.2 basis points higher at 4.848%, according to Tradeweb, as the DXY dollar index rose to a one-week high of 102.046.

"A slowdown in the AI build-out is the base case under Democratic supervision, leaving the AI trade exposed to a huge amount of uncertainty," KBC Bank analysts said in a note.

Earlier in the session, the 10-year German Bund yield fell to 3.208%, the lowest level since late August, while the 30-year yield declined to 3.608%, the lowest since the end of July. Two-year yield declined to 2.916%, the lowest since end-August. Yields have moved slightly above those levels since then but remained lower on the day.

The 10-year U.K. gilt yield turned higher from earlier falls, last rising 1.3 basis points to 5.156%.

Markets are reassessing the level of interest rates that the U.S. economy can sustain, pulling rate-expectations lower and long-dated yields with them, Julius Baer's Borges said.

Money markets currently price in 42 basis points of interest-rate hikes by the Federal Reserve over the next 12 months, according to LSEG.

Payrolls data for October, due for release at 1330 GMT, could reshape Fed rate expectations in either direction, analysts said.

"A stronger-than-expected payrolls figure, particularly alongside firm wage growth, could reinforce expectations of further Fed tightening, pushing Treasury yields and the dollar higher," said Daniela Hathorn, senior market analyst at Capital.com in a note.

"Conversely, weaker employment could ease rate expectations, although a sufficiently disappointing report might also deepen concerns about the economic outlook," she said.

Analysts' consensus forecast in The Wall Street Journal's poll is for 59,000 new jobs in October compared with 29,000 in September.

Investors will also watch how the Middle East situation evolves and the consequent impact on energy prices.

"Hopes for diplomatic progress have yet to produce an agreement," said Kudo.com's Konstantinos Chrysikos in a note. "Any escalation could add to safe-haven demand, while a deal that reopens Hormuz would ease oil prices and weaken inflation fears," he said.

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

(END) Dow Jones Newswires

November 06, 2026 06:30 ET (11:30 GMT)