Global bond yields retreat after Europe and US hit multi-decade highs

  • Global bond yields retreated Friday after European and US borrowing costs surged Thursday.
  • €3.3 trillion was paid in annual interest on internationally traded government bonds, according to the IIF.
  • France plans €340 billion of borrowing next year amid public debt reaching 119% of GDP.

Global bond markets stabilized Friday after a sharp sell-off pushed borrowing costs in Europe and the United States to multi-decade highs. Brent crude fell about 2% to around $99.95 a barrel, easing concerns that higher energy prices would prolong inflation and prompt additional rate increases. UK 30-year gilt yields fell to around 5.92% after exceeding 6% on Thursday for the first time since 1998, while the 10-year and two-year yields also declined. French 10-year yields eased to about 4.92% after reaching 4.96%, their highest since July 2002, while the premium over German debt widened beyond 140 basis points, the largest gap since 2012. The pressure followed France's 2027 budget proposal for €43 billion in new savings, a record €340 billion borrowing plan and public debt at 119% of GDP. Eurozone inflation rose to 3.8% in September, above expectations and the European Central Bank's 2% target, while US Treasury yields also pulled back after reaching their highest level since 2002. Higher yields are tightening financial conditions as governments face more than $3.3 trillion in annual interest costs on internationally traded debt.

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