U.S. Treasury yields fell in European trade on Wednesday, retreating from multiyear highs hit the previous day, after Federal Reserve speeches lowered market expectations of interest-rate hikes, while European government-bond yields followed suit.
Lower oil prices also helped yields and rate-hike expectations move lower. The price of front-month November Brent crude moved closer to $100 a barrel as Saudi Arabia resumed exporting oil via its East-West pipeline after repairing damage caused by drone strikes.
The 10-year Treasury yield dropped 4 basis points to 5.214%, while the 30-year yield was 4.3 basis points lower at 5.550%. Yields dropped back after the 30-year yield hit a 24-year high of 5.621% on Tuesday while the 10-year yield reached its highest in 19 years at 5.293%.
The 10-year German Bund yield slid 5.6 basis points to 3.557%, while the 10-year U.K. gilt yield fell 7 basis points to 5.340%, Tradeweb data showed.
"Following Tuesday's surge in long-end yields to levels last seen in 2002, Treasurys found a temporary floor," said Patrick Munnelly, market strategist at Tickmill Group.
Wednesday's fall in yields comes after New York Fed President John Williams said he saw no need for the central bank to rush to continue raising interest rates after the first rate increase in three years in September. U.S. job openings and consumer confidence data were also worse than expected.
Money markets priced a 45% probability of a 25-basis-point Fed rate hike in October, well below odds of 70% on Monday, according to LSEG data. Expectations also retreated on a 12-month horizon, with markets now pricing a cumulative 93 basis points over that period, having priced 100 basis points on Tuesday.
Fed Governor Michael Barr and President Alberto Musalem maintained a hawkish view, while the Chicago Fed President Austan Goolsbee remained neutral pending clearer evidence of falling inflation.
"Markets interpreted the communication overall as a dovish signal," said Antti Ilvonen, senior fixed income and FX analyst at Danske Bank, in a note.
Still, fundamental concerns remain that could cause yields to rise again.
Tuesday's rise in yields reflected persistent term-premium expansion tied to fiscal deficits, heavy Treasury supply, and massive corporate debt issuance backing AI infrastructure, Tickmill's Munnelly said.
In the eurozone, focus is on flash estimate inflation data for September. French inflation came in higher than expected, with the EU-harmonized HICP rising 3.4% on the year, picking up from 2.6% in August. Data for Germany are due at 1200 GMT.
An upward revision to U.K. gross domestic product in the second quarter, showing GDP growth of 0.5% on the quarter versus the first estimate of 0.4%, didn't alter the downward trend for gilt yields, even as sterling rose to a one-month high against the euro.
In the U.S., PCE inflation data, the Fed's favored inflation gauge, will be released at 1230 GMT. Analysts in The Wall Street Journal's poll forecast the headline year-on-year figure at 3.7% in August, unchanged from July.