Euro zone bond yields lower at end of volatile day

Euro zone bond yields were set to finish a volatile day lower on Wednesday, as the recent global selloff eased with help from U.S. labour market data that supported bets on a Federal Reserve rate cut this month.

Germany's 30-year yield rose to a 14-year high of 3.4340% before reversing course, and was last down nearly 5 basis points on the day at 3.37%.

Other regional long-dated bond yields, including in France and Italy, tracked their German counterpart's moves, hitting multi-year highs before falling, last down around 6 bps at 4.45% and 4.61%, respectively.


Similar moves were also seen in U.S. Treasuries and British gilts, while Germany's benchmark 10-year yield was last down nearly 5 bps at 2.74%.

Bond yields, especially long-dated ones, have been rising sharply in recent days, before Wednesday's stabilisation.

Still, with worries about high debt levels in many countries, unstable politics, and reduced demand from investors like pension funds for long-dated debt, bond markets are not out of the woods yet.

Investors are bracing for heavy bond supply in September and October from Germany, Japan and the U.S., while also confronting political worries in France and Japan.

French Finance Minister Eric Lombard said the minority government would have to compromise on plans to cut the budget deficit if Prime Minister Francois Bayrou is toppled in a confidence vote on September 8.

"Structural weak demand is a theme across developed bond markets," Sree Kochugovindan, senior economist at abrdn, told the Reuters Global Markets Forum, adding that "in the near term, the key risks will be political factors."

"In France, the no-confidence vote will be closely watched, but a lot is priced in already," Kochugovindan said.

Wednesday's rally was given additional succour by U.S. data that showed job openings fell more than expected in July and hiring was moderate, consistent with easing labour market conditions.

That supported expectations of a Federal Reserve rate cut this month, and sent Treasury yields lower, a move which spilled over to a degree to Europe.