Benchmark sovereign bond yields in Europe and Australia pulled back from multi-year highs on Thursday, easing pressure on global debt markets after a prolonged sell-off.
Germany’s two-year Schatz yield fell to 2.966% and its 10-year Bund yield slipped to 3.362%, retracing from levels last seen in 2011. In France, the 10-year OAT yield remained elevated near 4.237%, holding close to levels not observed since the 2008 financial crisis, though it ended a seven-day streak of gains. Australia’s 10-year government bond yield declined to 5.157% after touching a 15-year high of 5.205% the prior session.
The retreat followed softer-than-expected U.S. labor data and dovish signals from Federal Reserve officials, which tempered expectations for aggressive global monetary tightening. New York Fed President John Williams said policymakers would need to assess additional economic data before determining the next policy move. U.S. private payrolls rose by 38,000 in August, according to ADP data, missing consensus forecasts and reinforcing signs of a cooling labor market ahead of Friday’s nonfarm payrolls report.
Market participants cited geopolitical risks in the Persian Gulf as a lingering concern, with tensions over the Strait of Hormuz keeping crude oil prices elevated and complicating disinflation efforts. Sovereign debt desks also face structural headwinds from elevated government borrowing to fund fiscal programs, compounded by a surge in corporate bond issuance tied to artificial intelligence infrastructure investments.
The European Central Bank is scheduled to hold its next policy meeting on September 10.
