Eurozone Bond Yields Fall in Opening Trade — Market Talk

0652 GMT - Eurozone government bond yields fall in opening trade as U.S. Treasury yields stabilize after a light selloff in Asia and as oil prices move slightly lower. There is no government bond supply in the eurozone on Friday, but France and Spain will announce details for their auctions next week. The 10-year Bund yield falls 3.1 basis points to 3.575%, having hit 3.611% on Thursday, the highest since 2009, according to Tradeweb. ([email protected])0649 GMT - Bitcoin edges lower as the ongoing Middle East conflict and expectations for further interest-rate rises by the Federal Reserve dampen risk sentiment. Bitcoin is under pressure from the macro environment rather than a collapse in institutional demand, Zaye Capital Markets analyst Naeem Aslam says in a note. "Rising Treasury yields, stronger U.S. economic activity and higher oil prices have increased expectations that monetary policy could remain restrictive, making high-duration and risk-sensitive assets less attractive." Bitcoin falls 0.5% to $83,959, having pulled back from its highest level since late January reached Monday at $87,315, LSEG data show. ([email protected])0642 GMT - The dollar eases slightly but remains close to an eight-week high, supported by expectations for further U.S. interest-rate increases. Federal Reserve officials John Williams and Anna Paulson said on Thursday that further policy tightening might be needed while the Fed's Beth Hammack said inflation pressures remain elevated. "As long as U.S. macro data shows no signs of cooling, the Fed will remain firmly on a tightening bias, and we continue to expect the euro versus the dollar to trend even lower from here," Danske Bank's Mohamad Al-Saraf says in a note. The DXY dollar index falls 0.1% to 101.147 after hitting an eight-week high of 101.398 Thursday. The euro is flat at $1.1384 after reaching an eight-week low of $1.1358 Thursday. ([email protected])0627 GMT - The summit between President Trump and Chinese leader Xi Jinping shows that limited surprises is good news, ING's Lynn Song says in a note. As widely expected, there weren't many major breakthroughs on key issues such as artificial intelligence and geopolitics. "Progress on tech competition and geopolitical developments is hard to come by," Song says. Still, that doesn't mean the summit was for nought, he adds. The summit reflects wider efforts to sustain regular dialogue, lower the risk of misunderstandings and avoid costly missteps. This comes at a time when economic growth is becoming more uneven and fragile across many countries, Song says. ([email protected])0538 GMT - Morgan Stanley has abandoned its forecast for a weaker U.S. dollar. "We thought the U.S. dollar's descent would continue into 2H26. We were wrong," the bank says in a note to clients. MS now forecasts U.S. dollar strength through year-end and into 2027 as interest rates rise. The bank forecasts the DXY to rise to 104.00 by mid-2027, from 101.2 now. Fed hawkishness and U.S. rate outperformance, coupled with increased negative political risk in Europe, suggest the U.S. dollar's outlook is rosier, not weaker, it adds. ([email protected]; @JamesGlynnWSJ)0534 GMT - U.S. Treasury yields rise in Asian trade but stay below Thursday's multiyear highs as markets embrace the idea of higher-for-longer bond yields in anticipation of further interest-rate hikes. "Tighter policy expectations are driving yields higher--not risk premia," SEB's Gustav Helgesson says in a note. The global rise in bond yields is continuing at a rapid pace, particularly in the U.S., the macro strategist says. The 10-year Treasury yield is up 1.3 basis points at 5.174%, below Thursday's 5.225%, the highest since mid-2007, according to Tradeweb. ([email protected])0520 GMT - The U.S.-Iran conflict, as well as energy price developments remain the main drivers and the key uncertainty for eurozone government bond yields and market pricing of the European Central Bank's rate path, say Societe Generale rates strategists in a note. "The speed of the recent ECB repricing has surprised many market participants, but the level of the terminal rate can be rationalized," they say. Money markets currently price in 100 basis points of interest rate hikes by the end of October 2027, according to LSEG. ([email protected])0511 GMT - Longer-dated Japanese government bond yields aren't expected to climb further, Capital Economics' John Higgins says in a note. The chief economic adviser for financial markets sees the 10-year JGB yield ending this year and next at 3.0%. That is around current levels, after the latest JGB selloff sent the 10-year yield decisively above 3% for the first time in three decades. He notes that mid-2027 expectations for the BOJ policy rate, as implied by the OIS market, roughly align with CE's 2% forecast. Beyond that, "we don't expect the rate to continue to rise by as much as investors appear to expect," Higgins writes. CE views the neutral level at or around 2%, while OIS-implied rates in the distant future now exceed 4%. ([email protected])0504 GMT - The continued rise in longer-term Treasury yields is hardly surprising, Catalyst Funds' Larry Holzenthaler says. Inflation is well above the Federal Reserve's target and it appears they are going to continue to raise rates, the portfolio manager says. "Government debt and spending levels remain a concern globally, economic data in the U.S. continues to point to a relatively strong environment," he says. With the energy situation, "it's a long list," he says. "Add to that AI spend and it's hard to bet that rates are headed lower anywhere along the curve." Markets' pricing of three interest-rate hikes by the end of 2027 "seems fairly reasonable" and would certainly make holding traditional fixed income assets a painful exercise, he says. ([email protected])0458 GMT - The bond market is currently factoring in several elements simultaneously, Neuberger's Rob Dishner says in a note. "On one hand, oil prices remain persistently high," the senior fixed income portfolio manager says. "On the other, the growth outlook is shifting: growth is now viewed as stable-or even robust-barring evidence to the contrary," he says. This marks a departure from the previous consensus, which held that interest-rate levels and commodity prices would weigh on growth, he says. The recent rise in bond yields may reflect growth resilience more than fears of inflation, he says, adding that concerns regarding fiscal policy also continue to weigh on fixed-income markets. ([email protected])0454 GMT - The yield curve continues to normalize, plain and simple, Laffer Tengler Investments' Byron Anderson says in a note, adding that "we are firmly set up for higher yields in this environment." "Rate hikes do not solve Iran, oil, AI boom, or inflation," the head of fixed income says. They do increase borrowing costs for everyone else in the market, which will eventually hit labor and the consumer if the Federal Reserve gets aggressive with hikes, he says. Increasing bond issuance, massive debt and deficits, ever-increasing interest costs, and a Fed that's hands-off with guidance and balance-sheet management all point to higher yields. ([email protected])0442 GMT - The 10-year U.S. Treasury yield is being pushed higher by a confluence of factors, according to Madison Investments' Mike Sanders. He lists stronger economic data, heightened Middle East tensions, discussion of a potential diesel export ban and a weak five-year Treasury auction as the drivers. "At this point, it's difficult to point to any single culprit for today's move," the head of fixed income says. The combination of fiscal, economic, geopolitical and supply-side inflation pressures converging has bond markets in less familiar territory, Sanders says. The recent rise in yields can no longer be attributed simply to concerns over the deficit, he adds. ([email protected])