By: Fiona Cincotta, Senior Market Analyst
The 30-year gilt yield has climbed to its highest level since 1998, while U.S. Treasury yields have found some respite after cooler-than-expected U.S. core PCE inflation data. Europe is carrying the bond market pressure, with the French 10-year OAT yield at a 25-year high and the French-German yield spread at its widest since March. European stocks are falling as a result, and the FTSE 100 was down around 2% at one point. U.S. stock futures, meanwhile, are pointing higher as U.S. Treasury yields hold steadier than their European counterparts.
Fiona Cincotta, StoneX Senior Market Analyst, has more than 15 years of experience trading and analyzing UK, European and U.S. markets, combining fundamental and technical analysis. She covers forex, equities, commodities and crypto assets, with a particular focus on UK and European macroeconomic themes.
U.S. Treasury yields remain elevated, but cooler-than-expected U.S. core PCE inflation data has eased some of the pressure on them. Cincotta describes the move as "a little bit of a respite" for U.S. Treasuries rather than a full reversal. That relief keeps the bond market strain concentrated in Europe. U.S. stock futures are pointing to a positive open, and that U.S. strength is doing some of the heavy lifting for the FTSE 100's partial recovery.
"They're not liking what they're seeing as far as the fiscal positions in the UK is concerned," Cincotta says of the market reaction to the UK and French budget backdrop. In the UK, attention is on the Chancellor's budget, along with changes to Universal Credit that could leave the UK fiscal position more vulnerable. The French budget has also unnerved markets, pushing the French-German yield spread to its widest since March. Consequently, European equities are selling off, with the FTSE 100 underperforming its European peers. U.S. Treasury yields have not matched that European move.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fiona Cincotta, StoneX Senior Market Analyst
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