I) US
The 10-year Treasury yield stands at 4.49% and the 2-year at 4.07%, with the 10-year having risen more than 4bps on Wednesday — its largest single-day move since May 19 — after stronger-than-expected private-sector employment data reinforced expectations that the Fed could raise rates this year; yields have edged slightly lower on Thursday as markets partially price in a US-Iran deal. US investment-grade issuance has surpassed $1 trillion year-to-date, the fastest pace since 2020, reflecting robust corporate appetite for debt despite elevated rates. Strategists are broadly constructive on Treasuries at current
levels — Payden Global, Ducenta Squared, and HSBC Private Bank all see value, with a preference for the intermediate 5–10 year belly of the curve over the long end given volatility risks. Pimco argues the
recent rise in long-end yields is driven by Fed expectations rather than AI-related borrowing, though it acknowledges the latter could become a structural driver over time. Bond investors are notably more cautious than equity investors on the growth outlook, with Nuveen flagging fiscal deficits and
structurally higher borrowing costs as key risks.
II) EU
The German 10-year Bund yields 3.02% and the French 10-year OAT 3.66%, with both curves having
shifted higher over recent sessions as rising oil prices put upward pressure on yields globally. The ECB is widely expected to deliver a 25bp rate hike at its meeting next week — ECB's Rehn described it as an "insurance hike" — with swaps pricing approximately 64bps of total tightening by year-end, though BNY warns that a hawkish ECB has so far provided little support to the euro and that tighter policy risks
weighing on growth.
III) UK
The 10-year gilt yields 4.91%, with 30-year yields above 5.5% — among the highest in major developed markets — attracting sustained foreign demand; BofA forecasts overseas buyers extended their purchasing streak through May for an eighth consecutive month. However, a Bank of England staff paper found that QT asset sales have pushed up UK borrowing costs by approximately 40 basis points, adding pressure to already-stretched government finances, and Bloomberg analysis suggests the tactical rally in long-dated gilts is approaching its natural terminus as political uncertainty around a potential change in government re-emerges.
IV) Asia
Japan 10-year yield rose 3bps to 2.67% after Bloomberg reported that Bank of Japan officials are set to consider a 25bp rate hike at their June 15–16 meeting — which would lift the policy rate to 1% — with the possibility of a further hike later in 2026, citing still-low real interest rates and persistent upside inflation risks. Overnight index swaps are pricing a 94% probability of a June hike. China's yield curve
shifted modestly lower on Thursday, with the 10-year CGB yield falling 0.8bps to 1.71% — remaining near historically low levels. The onshore credit market continues to rally, supported by abundant
liquidity; the 2-year AA corporate note yield is at a historic low, and spreads to sovereign debt have compressed to multi-decade tights, with analysts suggesting the rally has further to run as institutional demand for yield persists.
