U.S. Treasury Yields Fall; Eurozone Bond Yields Mixed After GDP Data -- Update

By Emese Bartha

U.S. Treasury yields fell in European trade on Friday while eurozone bond yields were mixed after first-estimate gross domestic product data for the third quarter revealed disparities in economic performance.

Earlier in the day, Treasury yields fell to multiweek lows in Asian trade following a number of interest-rate decisions from key central banks this week.

The Federal Reserve on Wednesday, the European Central Bank on Thursday, and the Bank of Japan on Friday all left interest rates on hold, although money markets price in significant chances of hikes from all of them in December, according to LSEG data.

"The ECB and Fed kept policy on hold, balancing stubborn inflation against tightening financial conditions," Societe Generale rates strategists said in a note. "For now, both can afford to take a breather until December, with economic resilience leaving room for further tightening. Beyond December, however, the path becomes much less clear."

The two-year Treasury yield fell 5.8 basis points to 4.597%, having hit a seven-week low of 4.559% earlier in the session, according to Tradeweb. The 10-year Treasury yield declined 5.2 basis points to 4.936%, having touched a seven-week low of 4.892% earlier. The 30-year yield was last 3.3 basis points lower at 5.295%, touching a five-and-a-half-week low of 5.258%.

In Europe, yields on bonds of fiscally weaker countries rose, with the 10-year French OAT yield up 3.3 basis points at 4.938% and the 10-year Italian BTP yield rising 1.5 basis points to 4.506%. The 10-year German Bund yield declined 1.4 basis points to 3.338%.

The moves came after Germany reported slightly stronger-than-expected GDP growth for the third quarter, while data from France and Italy were weaker.

France's GDP fell 0.1% in the third quarter after a stagnation in the second quarter, and below analysts' expectation of a 0.1% expansion in The Wall Street Journal's poll. Italy's third-quarter GDP was stable on the quarter, below expectations of a 0.1% expansion.

By contrast, Germany's third-quarter GDP rose by 0.2% on the quarter, faster than the unchanged level forecast by analysts in the WSJ poll.

Even as Treasurys have taken a breather recently, risks of higher bond yields globally persist amid concerns about the impact of high energy prices and geopolitical uncertainty, analysts said.

"While yields have retreated from highs a few weeks ago, elevated oil prices, inflation concerns, and fiscal spending continue to pose risks to longer-term bonds," said Mike Sanders, head of fixed income at Madison Investments.

The Fed's pause is notable given that price levels remain above target, the latest inflation report disappointed, and the labor market is stable, Sanders said. He added that the drivers of inflation haven't subsided, yet the Fed chose to wait for more information.

Since the latest CPI inflation report, Thursday's PCE inflation data--the Fed's favored inflation gauge--also showed strong price pressures. The personal-consumption expenditures price index rose 3.6% in September, accelerating from August's 3.4% gain and compared with a 3.7% consensus expectation from The Wall Street Journal's poll.

By holding interest rates steady, the Fed has effectively deferred the debate on inflation rather than settled it, Karen Manna, fixed income strategist at Federated Hermes, said in a note.

"The market's attention now shifts to December, incoming economic data, and any signals that clarify the Fed's reaction function," she said.

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

(END) Dow Jones Newswires

October 30, 2026 06:24 ET (10:24 GMT)