US Treasuries rebounded from a fierce global bond selloff, with pressure in European markets driving safe-haven demand and pushing the 10-year Treasury yield back from a 24-year high.

The US bond market's rebound gained momentum on Thursday. Concerns over France's fiscal and political situation drove up eurozone risk premiums. UK long-dated gilt yields briefly broke above 6%.

In the United States, safe-haven demand pushed the two-year Treasury yield down as much as 13 basis points to 4.75%, heading for its largest single-day drop since August 2025. Izaac Brook, US rates strategist at RBC Capital Markets, said: "Thursday's move had very little to do with US fundamentals or US data. Everyone was looking at overseas yields and saying, 'need to move to safety, buy US Treasuries.'"

The move provided temporary relief to a global bond selloff that had persisted for weeks. After a weaker-than-expected manufacturing report showed some cooling in parts of the US economy, short-term Treasury yields accelerated their decline as traders scaled back bets on the extent of Federal Reserve rate hikes in the coming months. Fed Vice Chair Philip Jefferson also indicated that policymakers may need more time to decide their next move. Traders currently price about a one-in-four chance of a Fed rate hike this month. Swap spreads narrowed rapidly, indicating that crowded positions built over the past few weeks are being unwound.

Global Pressure

In Europe, the spread between Italian and German two-year bond yields nearly doubled to 55 basis points on Thursday, the largest single-day increase on a closing basis since 2020. The spread between French and German two-year yields widened by as much as 22 basis points, the largest increase since 2012. Mike Riddell, lead portfolio manager of Fidelity International's Strategic Bond Fund, said: "The situation in France has been deteriorating slowly but steadily. But today feels like the first time the broader financial markets have truly taken notice."

A Bloomberg index showed that global government bonds had just recorded their worst quarterly performance since 2024. Thursday's selloff pushed UK 30-year gilt yields above 6% for the first time since 1998. Some analysts and investors believe US long-dated Treasury yields could also reach that level. In Washington, the Trump administration has been trying to slow the bond decline by increasing long-dated Treasury buybacks. The US Treasury on Thursday bought back $6 billion of Treasuries maturing in 10 to 20 years in one operation.

Simon White, macro strategist at Markets Live, said: "Treasuries may look cheap relative to stocks, GDP and the global economic cycle, but judged solely against their own history, the bond market still has room to fall further before reaching oversold conditions and staging a sustained rebound."

Investors will look to Friday's US nonfarm payrolls data for clues about the state of the economy and the Fed's next move. A survey of analysts shows that September nonfarm payrolls are expected to increase by 88,000, less than half the job gains of the previous month.