European bonds lagged behind US Treasuries, influenced by Federal Reserve Governor Christopher Waller's call for immediate rate cuts, which buoyed US bonds. The German bond yield curve steepened in a bearish trend, with yields rising by 1-3 basis points, led by longer-term yields. A similar pattern was observed across the European government bond market, with long-term UK bond yields increasing by 2-3 basis points.
The US Treasury yield curve steepened in a bullish trend, as the two-year Treasury yield fell by 5 basis points to 3.86%. Data revealed that foreign investors purchased nearly 100 billion euros of eurozone bonds in May, marking the highest level in 2023. Looking ahead, market attention will focus on the auctions of longer-term German and UK bonds, along with the European Central Bank's interest rate decision.
Market specifics include a 2 basis point rise in German bond yields to 2.70%, a 26.00 point drop in German bond futures to 129.57, and a 1 basis point increase in Italian 10-year bond yields to 3.55%. The Italy-Germany bond spread remained stable at 86 basis points. Additionally, French 10-year bond yields rose by 2 basis points to 3.40%, while UK 10-year bond yields increased by 2 basis points to 4.67%.
