U.S., Eurozone Bond Yields Rise But Two-Year Treasury Stabilizes — Update

By Emese Bartha

U.S. Treasury yields mostly rose in European trade on Friday as inflationary pressures kept expectations for further Federal Reserve interest-rate hikes strong, while eurozone government bond yields also increased.

The yield on two-year Treasurys--hardest hit by Thursday's selloff--was marginally lower at 4.849%, while the 10-year Treasury yield rose 2.4 basis points to 5.126%, according to Tradeweb.

The stabilization of the two-year yield "was in part a reflection of the comments from New York Fed President [John] Williams," said Derek Halpenny, head of research at MUFG Bank, in a note.

Williams said the Fed still has work to do to get monetary policy to the right place, and that inflation remains too high.

The 10-year German Bund yield increased 5.1 basis points to 3.375%, while yields on 10-year eurozone peer bonds also rose.

While most analysts agree that the Fed will raise interest rates in December, they continue to ponder the size, speed and frequency.

Upside growth surprises in the U.S. suggest that current monetary policy is not restrictive and support the notion that the Fed has more tightening to do, said Jussi Hiljanen, chief U.S. and eurozone rates strategist at SEB. Despite hints by Fed Governor Christopher Waller at the possibility of a 50-basis-point interest-rate hike, SEB expects the Fed majority to lean toward smaller and gradual steps at every second meeting, with a 25-basis-point hike in December to be followed by another of similar size in March, Hiljanen said.

On Thursday, Cleveland Fed President Beth Hammack said she prefers smaller, steadier changes in monetary policy because they make it easier for businesses and households to plan. San Francisco Fed President Mary Daly said: "My bias is that further tightening will be needed because you just see this consistent pressure on inflation that isn't simply in the sectors that are most directly affected by tariffs or oil."

Money markets price in an 89% probability of a 25-basis-point Fed interest-rate increase in December, while they assign an 11% probability to a 50-basis-point hike, according to LSEG data.

Jefferies maintains expectations for a 25-basis-point rate rise in December.

"But beyond December, the outlook will depend on the war and the oil prices," global economist Mohit Kumar said in a note. "If the current state of 'no war no peace' continues for the next couple of months, we could see the case for a Fed hike in January."

Friday's data to watch include the producer price index for October at 1330 GMT, which is expected to have accelerated to 6.6% on year from 6.3% in September, according to The Wall Street Journal's poll of analysts.

Later in the day, S&P Global Ratings will review Italy's credit rating, currently at BBB+ with a positive outlook.

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

(END) Dow Jones Newswires

November 13, 2026 05:02 ET (10:02 GMT)