After spiking to multi-year highs, government bond yields in the U.S. and Europe stabilized this week as investors awaited policy decisions from the Fed and ECB. The 10-year U.S. Treasury yield ended at 3.65%, while Germany’s 10-year Bund held near 2.15%.
Mixed economic data contributed to the pause. U.S. retail sales beat estimates, but PPI came in softer than expected, leaving traders uncertain about inflation’s trajectory. In Europe, industrial production dropped by 0.4% in April, reinforcing expectations that the ECB will maintain current rates.
IGS Investment’s Fixed Income Chief, Helena Fischer, remarked:
“We’re in a holding pattern as markets digest incoming data. Curve flattening suggests investors anticipate slower growth ahead. For now, we recommend underweighting duration in core markets and exploring select credit opportunities in high-quality issuers.”
Inflation-linked bonds outperformed nominal equivalents, and municipal bonds attracted flows as investors sought tax-efficient yield. The firm’s weekly Fixed-Income Insights bulletin advises clients to monitor credit spreads for early signals of risk sentiment shifts.