European bond yields ease after sell-off as US mortgage rates hit a high in Trump’s term
European government bond yields eased on Friday morning, pulling back from a brutal sell-off earlier in the week, even as US Treasury yields pushed to fresh multi-decade highs on Wednesday and Thursday, and mortgage rates in America hit 7%, their highest level since Donald Trump returned to office.
European bond yields experienced a slight easing on Friday amid a significant sell-off, following one of the most severe bond sell-offs in recent years. France's 10-year yield dropped from around 4.7% to 4.67%, while Germany's 10-year bond yield decreased from 3.61% to 3.59%. The gap between French and German 10-year borrowing costs surged to over 110 basis points, marking the widest since the 2012 eurozone debt crisis.
This was driven by investors' concerns over France's debt and election risks, exacerbated by a downgrade from ratings agency Scope and the possibility of a 2027 presidential runoff between far-right and far-left candidates. Meanwhile, the United States saw its 30-year Treasury yield hit a high not seen since President Trump's term began, with the yield on the 10-year Treasury reaching levels last observed in 2007.
Rising oil prices and mounting fears of persistent inflation and burgeoning government debt contributed to this surge. Notably, US homebuyers are facing higher borrowing costs, with the average 30-year mortgage rate reaching 7%, a one-percentage-point increase since the Iran war commenced and the highest level since Donald Trump's inauguration in January 2025.
The peculiar aspect is that bonds have stopped serving as a safe haven as stocks have faltered. Inflation, energy shocks, and a slowing economy have driven prices up, causing stocks to fall, but interest rate hikes have made bonds less appealing to investors. Experts suggest inflation-linked bonds, gold, and other assets as potential alternatives, though bonds should not be entirely abandoned.
Oxford Economics believes the rate spike is likely temporary and mainly reflects a reassessment of monetary policy responses to surging energy prices. However, France and Italy, in particular, may need to tighten fiscal policy significantly to counter sustained interest rate increases, while Spain, Greece, and Portugal are better equipped to handle the pressure.
Written by urgent.news from Euronews's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
