Global Market: Eurozone bond rout loses steam, but rising oil prices keep investors wary

The selloff in eurozone government bonds eased on Wednesday as a stabilisation in the U.S. Treasury market offered some relief to investors, although elevated oil prices continued to fuel concerns about inflation and government borrowing, Reuters reported.

Germany's 10-year government bond yield, the benchmark for the euro zone, fell 1 basis point to 3.247%. It had climbed to a 15-year high on Tuesday as investors grew increasingly concerned about rising energy costs and increased government borrowing.

Germany's 30-year yield also eased 1 basis point to 3.762%, after reaching its highest level since 2011 in the previous session. Bond yields move inversely to prices.


According to Reuters, improved sentiment was partly supported by a modest recovery in U.S. Treasuries. The U.S. 10-year Treasury yield ended Tuesday 2 basis points lower after briefly reaching its highest level since early 2025, following weaker-than-expected housing construction and industrial production data. The yield fell another 2 basis points on Wednesday.

Oil Prices Keep Pressure on Bonds
The respite in bond markets remained limited as oil prices stayed elevated. Brent crude rose about 1% to $91.60 a barrel, close to its highest level since late July.

Reuters reported that U.S. President Donald Trump said on Tuesday that no talks were taking place with Iran and maintained that the Strait of Hormuz was open. Iran has said the strategically important waterway remained closed, adding uncertainty to the outlook for global energy supplies.

Higheroil prices are a particular concern for bondinvestors because they can add to inflationary pressures and complicate the interest-rate outlook.

Long-Term Bonds Bear the Brunt
Longer-dated government bonds were at the centre of Tuesday's selloff. These securities tend to be particularly sensitive to expectations for economic growth, inflation and government borrowing rather than solely to central bank policy.

According to Reuters, investors and analysts have pointed to several factors behind the rise in yields, including higher energy prices, substantial government borrowing and increased borrowing by artificial-intelligence hyperscalers. Resilient economic growth has also contributed to upward pressure on yields.

France's 30-year government bond yield climbed above 4.9% on Tuesday, reaching its highest level since 2008. It fell 1 basis point on Wednesday as broader selling pressure eased.

France-Germany Yield Spread Widens
The French bond market remained under particular scrutiny. The spread between French and German 10-year government bond yields rose above 86 basis points on Tuesday, reaching its highest level since October 2025, before easing to around 85 basis points on Wednesday.

Reuters noted that political and fiscal concerns in France are also weighing on investors, with the country's budget discussions and next year's elections adding to uncertainty.

Germany is scheduled to auction 6 billion euros ($7 billion) of 10-year government bonds on Wednesday, providing another test of investor demand after the recent surge in yields.

While the stabilisation in U.S. Treasuries has helped European bond markets regain some footing, persistent oil price pressures and concerns over government borrowing suggest that the recent rise in euro zone yields may continue to keep investorscautious.