A global sovereign bond sell-off eased on Thursday as borrowing costs in Europe and Australia retreated from multi-year peaks, offering a brief respite after a week of aggressive duration selling.
Germany’s 10-year Bund yield fell 0.12 percentage points to 3.362%, snapping a seven-session streak of gains, while the 2-year Schatz yield declined to 2.966%. French 10-year OAT yields, however, rose for a seventh consecutive session to 4.237%, nearing levels last seen during the 2008 financial crisis. Australia’s benchmark 10-year government bond yield eased to 5.157% after peaking at a 15-year high of 5.205% on Wednesday, driven by robust GDP growth and elevated July inflation.
The pause in the rout followed dovish signals from U.S. policymakers and cooler-than-expected labor market data. ADP reported U.S. private payrolls rose by 38,000 jobs in August, missing consensus forecasts and reinforcing expectations that the Federal Reserve may adopt a more cautious approach to further tightening. New York Fed President John Williams noted that officials need additional data before determining interest rate adjustments.
Geopolitical tensions in the Persian Gulf continued to exert upward pressure on crude oil prices, complicating central banks’ disinflation efforts. Direct U.S.-Iranian strikes over the Strait of Hormuz have kept energy costs elevated, threatening broader inflation risks for transportation and manufacturing sectors.
Sovereign debt markets also face structural headwinds, with record issuance volumes from major governments competing against a surge in corporate bond sales tied to artificial intelligence infrastructure investments. Analysts warn that persistent supply indigestion could prolong volatility in global bond markets.
Investors now await Friday’s U.S. nonfarm payrolls report and the European Central Bank’s policy meeting on Sept. 10, which may provide further clarity on the trajectory of monetary policy amid shifting economic and geopolitical conditions.
