U.S. Treasury yields moved higher on Thursday as markets priced in further Federal Reserve rate increases, while yields on German and U.K. government bonds slipped. The moves came as investors weighed U.S. inflation and jobs data against stronger-than-expected U.K. economic growth.
The two-year Treasury yield rose 3.4 basis points to 4.760%, and the 10-year yield gained 0.1 basis point to 4.989%, according to Tradeweb. The 10-year German Bund yield fell 2 basis points to 3.294%, while the U.K. 10-year gilt yield declined 1.6 basis points to 5.209%.
U.K. gross domestic product grew 0.7% in the three months through September from the previous quarter, the country’s statistics agency said. It was the strongest quarterly expansion since the first quarter of 2024, matching the consensus forecast in a Wall Street Journal survey of economists. LSEG data put the market-implied probability of a 25-basis-point Bank of England rate increase in December at 75%.
The figures pointed to economic resilience, said Sam Jochim, an economist at EFG Asset Management, adding that the U.K. economy could withstand further monetary tightening. He said the data would be positive news for the Bank of England amid headwinds including energy-price shocks related to the wars in Ukraine and the Middle East.
In the U.S., recent stronger-than-expected employment figures, hawkish Federal Reserve comments and October inflation above expectations have lifted bets on a December increase. Money markets put the probability of a 25-basis-point move at 91% and a 50-basis-point increase at 9%, according to LSEG. But Thierry Wizman, global FX and rates strategist at Macquarie Group, said events before the Fed’s Dec. 9 decision could alter the outlook. He cited a possible U.S. government shutdown, lower oil prices if hopes for a U.S.-Iran peace deal persist, and a further stock selloff if concerns about artificial intelligence worsen. The Treasury was due to auction $25 billion in 30-year bonds on Thursday.
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