Bond Market Today: Treasury yields witness volatile Monday, check latest data

Euro area benchmark Bund yields edged lower and French and Italian debt risk premiums fell slightly on Monday, as energy prices were mixed after US President Donald Trump unveiled a limited ceasefire between Russia and Ukraine. Investors are increasingly betting that Middle East tensions will remain contained, reducing the risk of an energy price spike ahead of the November US midterm elections.

Germany’s 10-year government bond yields, the euro area benchmark, were down 2 basis points (bps) to 3.47 per cent. Trade was thin with Japanese markets shut and the US on a partial holiday. German 2-year government bond yields, which are more sensitive to policy rate expectations, fell 0.5 bps to 3.09 per cent.

Money markets priced a European Central Bank deposit rate at 2.72 per cent by December, up from the current 2.50 per cent, reaching 3.20 per cent by late 2027.


The yield gap between OATs and safe-haven Bunds - a market gauge of the risk premium investors demand to hold French debt - widened 3 bps to 141.50 bps. It reached 158.67 in early October, the highest level since November 2011.

US Treasury yields flipped up and down in the bond market following their own sharp moves earlier last week. The yield on the 10-year Treasury eventually climbed to 5.24 per cent from 5.22 per cent late on Thursday.

It recently touched its highest level since 2002 because of worries about high inflation, the U.S. government’s massive debt load, signals that the U.S. economy is continuing to grow and other factors. High yields threaten to slow the economy by making borrowing money more expensive for everyone, and the average 30-year fixed-rate mortgage has already leaped to its highest level in nearly three years.

French far-right leader Marine Le Pen and hard-left rival Jean-Luc Melenchon widened their lead over other candidates stressing growing polarisation, a poll showed on Monday.

Analysts regard a hard-left victory as the least market-friendly outcome, arguing it could undermine efforts to rein in spending and restore France's fiscal health. Le Pen pledged sharply steeper cuts to spending last week.

The Italian spread was at 109 bps after hitting 129.74 early this month. Investors focus will shift to US economic data due on Tuesday.

"A strong print could thus add conviction to the December Federal Reserve hike and reignite the pressure on the front end," Erik Liem, strategist at Commerzbank said.

He also noted Commerzbank economists expect a strong pick-up in the headline number, while the rise in core should be more contained but still too high for comfort.