Global bond markets remained under strain as investors in China returned from the Golden Week holiday, and U.S. Treasuries were still at the center of the selloff.
Market data showed that on Wednesday, as the latest wave of global bond selling intensified, the yield on the 10-year U.S. Treasury briefly rose to 5.36%, while the 30-year yield reached 5.73%. Both marked the highest levels since 2002. At the same time, benchmark government bond yields in France and Italy climbed sharply, and the UK 30-year gilt yield touched its highest point since 1998.
Bond prices fall as yields rise. Later on Thursday, after the U.S. Treasury sold $39 billion in 10-year notes in an auction that drew strong demand, long-dated Treasury yields pulled back in New York afternoon trading. Even so, the auction stopped at 5.3%, the highest awarded yield for a U.S. 10-year Treasury auction since November 2000.
The Treasury is also scheduled to auction $22 billion in 30-year bonds on Thursday, with the issuance yield also seen at risk of setting a high not seen since 2000. After that, the department will carry out a long-bond buyback, purchasing as much as $6 billion in Treasuries maturing in 20 to 30 years.
Several pressure points are still driving the market
During China’s holiday, conditions in global bond markets did not improve much. New flashpoints appeared instead.
On Federal Reserve expectations, the market’s view on whether the Fed will raise rates again in October has swung repeatedly since the September policy meeting. LSEG data showed the probability of an October hike at 22%, down sharply from about 70% at the start of last week. Even so, the market still expects several rate increases over the next year.
Geopolitics remains another core focus. The input says Iran has stepped up attacks in recent days on tankers passing through the Strait of Hormuz, pushing oil prices higher. Brent crude stayed near the $100 mark throughout the holiday.
Simon Ballard, chief economist at First Abu Dhabi Bank, said, 「Clearly, the shadow cast by the geopolitical backdrop, along with the related persistence of price pressures and the rise in sovereign bond yields, continues to weigh on sentiment and overall risk appetite.」
In Europe, French budget negotiations and the nationwide protests that followed have kept markets on edge. French government bonds have become a new focal point in the broader long-duration bond selloff.
Tradeweb data showed the 10-year French government bond yield jumped nearly 14 basis points on Wednesday to 4.889%. By comparison, the 10-year German bund yield rose only 3.3 basis points to 3.507%. The spread between the French and German 10-year yields stood at 139 basis points, moving back toward the nearly 159-basis-point peak hit last Friday.
Mitch Reznick, head of cross-sector credit at Federated Hermes Limited, wrote in a report, 「France is rapidly becoming the focal point of Europe’s bond selloff. The speed of this move matters. Investors are selling French government bonds and moving into higher-quality German debt, widening the yield gap even more.」
Wall Street is split on where Treasuries go by year-end
Strategists remain sharply divided on whether U.S. Treasury yields will retreat meaningfully by the end of the year or push to fresh highs.
One camp, represented by Goldman Sachs’ William Marshall, still expects yields to fall. Their view is that markets have overreacted to worries about sticky inflation and heavy government debt issuance, setting the stage for a possible Treasury rebound before year-end. On the other side, analysts including Barclays’ head of U.S. rates research Anshul Pradhan argue that yields can keep rising and stay high for longer.
That split does not mean either side sees an easy path. The input points to several uncertainties clouding the market: the energy price shock linked to the Iran war, a Federal Reserve path that has turned back toward rate increases, and the AI boom that continues to inject strong momentum into the economy.
The bearish camp
Barclays has raised its forecast for the 10-year Treasury yield in the third quarter of 2027 to 5.25% from 5%, and it sees little in the short term that could drive yields lower.
Anshul Pradhan wrote in a recent report, 「As long as the U.S. economy stays resilient, it is hard to see a specific catalyst that would push yields below 5% right now.」 He added that if the economy remains firm, the 30-year Treasury yield could reach 6%.
He also said the market is still absorbing a long-run neutral rate of about 3.5%, while productivity may have room to surprise to the upside over time. If that happens, the market could reprice that long-term rate higher. In Barclays’ view, that would push the 30-year yield to 6%, or at least imply fair value for the long bond at a 6% yield.
Analysts at Danske Bank also see room for further pressure on long-dated U.S. Treasuries.
Jens Peter Sorensen, chief analyst at Danske Bank, wrote, 「Pressure is concentrated at the long end of the U.S. Treasury curve, driven not only by heavy Treasury supply but also by issuance from hyperscale cloud service providers. As investors demand a higher term premium at the long end, we do see a risk that 10-year and 30-year Treasury yields could reach 6%.」
Bank of America now forecasts the 10-year Treasury yield at 5% by year-end. That view aligns with its economists’ rate path, which calls for the Federal Reserve to raise rates at its next two meetings in October and December, bringing the economy back to what it described as an 「equilibrium」 state. At the same time, the team led by co-head of global rates strategy Mark Cabana has already laid out a set of trade ideas based on the possibility that yields may continue to rise.
Cabana said, 「We do not think this is the time to take the other side. Even though our yield forecast is lower, and even though we are still working from a baseline U.S. economic scenario, the balance of risks points to a greater chance of rates moving higher than lower.」
The bullish camp
Others in the market argue that long-bond yields moving closer to 6% are already attractive enough to bring buyers back and support a late-year rally. The strong 10-year Treasury auction on Wednesday was cited as a sign that some investors are stepping into long-duration bonds.
Goldman Sachs expects the 10-year Treasury yield to fall to 4.75% by year-end, a drop of nearly 60 basis points from Wednesday’s peak.
William Marshall, Goldman’s head of U.S. rates strategy, said, 「I think the constructive medium-term view we hold remains reasonable. Underlying inflation pressure has been brought under fairly good control. The reasons inflation is still high are either issues such as tariffs that are largely in the past, or events such as the ‘ongoing conflict’ involving Iran. Our base case is that these factors will eventually ease, and the market’s focus will return to the more structural fundamentals.」
JPMorgan expects the 10-year Treasury yield to fall to 5.05% by year-end, which it said would mark the yield’s 「first return to fair value in six months.」
Morgan Stanley expects the 10-year yield to decline to 4.8% by the end of the year.
Martin Tobias, a rates strategist at Morgan Stanley, said, 「The hawkishness priced into the market is far more pessimistic than the probability-weighted Fed path expected by our economics team. For comparison, our bearish baseline for the 10-year Treasury is 5.25%, and the cash market has already fully priced that outcome. By contrast, our bullish baseline tied to a deep recession triggered by a global oil crisis would imply a yield of 3.8%. Since forward contracts have effectively priced in the bearish case, we think the risk balance is tilted in favor of lower Treasury yields.」
The original article was written by Cailianshe. Its focus was the global bond selloff, the latest Treasury auction results, the pressure on French government bonds, and the diverging calls from major Wall Street institutions on where U.S. yields may head by year-end.