Euro zone government bond yields headed for their first weekly decline in six weeks on Friday, September 18, 2026, as a rally following the U.S. Federal Reserve's rate decision eased duration-seller pressure that had pushed German bund yields to 15-year highs just days earlier.
The German 10-year bund yield settled around 3.49% on Friday, recovering from a spike to roughly 3.54% on Tuesday during a wave of panic selling that also sent the U.S. 10-year Treasury above the 5% threshold. Germany's policy-sensitive two-year schatz stabilized near 3.23%, while Italy's 10-year btp hovered around 4.35% and France's 10-year oat held near 4.45%.
The turnaround began Wednesday and accelerated Thursday after the Fed unanimously voted to raise its benchmark rate by 25 basis points to a range of 3.75% to 4%. Fed Chair Kevin Warsh's insistence that the central bank remains focused on anchoring long-term inflation expectations reassured market allocators, demonstrating institutional independence despite political pressure from the Trump administration.
Duration paper found additional support from geopolitical developments. President Donald Trump voiced optimism about a potential diplomatic resolution to the seven-month Iran war during scheduled bilateral meetings with Gulf leaders at the UN General Assembly. Brent crude futures eased 1.5% to $104 a barrel as maritime shipping desks secured alternative routes around Persian Gulf bottlenecks, reducing energy-driven inflation concerns that had fueled the earlier selloff.
Across the Atlantic, the Bank of England held its benchmark rate steady at 3.75% on Thursday in a divided 6-3 vote but warned that inflation could surpass 4% early next year, flagging a potential rate increase at its November meeting.
In Tokyo, the Bank of Japan delivered another 25-basis-point increase to 1.25%, pushing Japanese borrowing costs to a 31-year high as the country's central bank continued its gradual path toward normalization heading into the fourth quarter. The cluster of central-bank decisions over the week — the Fed's hike, the BoE's hold with a dovish split and inflation warning, and the BOJ's further tightening — marked what traders called a "central bank marathon" that ultimately provided a breather for fixed-income desks after days of heavy duration selling.
