Global bonds stabilize as investors await Fed minutes

Global government bond markets steadied on Wednesday after a punishing selloff earlier in the week drove 30-year U.S. Treasury yields to their highest level since 2007 and pushed 10-year yields near levels last seen in early 2025. Investors now turn their attention to the Federal Reserve's July 28-29 meeting minutes, due at 2 p.m. ET, for signals on the central bank's tolerance for persistent above-target inflation.

Bond Market Finds Footing

The 10-year Treasury yield eased roughly one basis point to around 4.70% on Wednesday morning, while the 30-year yield held near 5.28%. The reprieve extended beyond the United States: Japanese government bonds gained after yields hit multi-decade highs, and Eurozone sovereign debt also steadied following Tuesday's sharp losses.barchart+2

The factors behind the rout, however, remain intact. Rising energy costs tied to unresolved Middle East tensions, sticky inflation readings across developed economies, and questions about whether government borrowing will continue to expand have all contributed to a repricing of long-term debt. "The combination of higher energy costs and higher long-term borrowing costs is becoming increasingly uncomfortable," said Fawad Razaqzada at Forex.com. "Equity investors have finally started to respond by going a bit defensive."cryptonomist+1

Fed Minutes in Focus

The July FOMC meeting produced an unusually sharp 9-3 vote to hold rates steady at 3.50%-3.75%, with three officials dissenting in favor of a quarter-point hike. The minutes may reveal how close the committee came to tightening further and how officials assessed inflation risks heading into the fall.barchart+1

U.S. rate futures price roughly a 67-68% probability of no change at the September meeting and about a 33% chance of a hike. A Reuters survey found 94 of 104 economists expect the Fed to stand pat next month. "Markets are worried about, what's the reaction function of the Fed? The market really doesn't love the fact that we don't have forward guidance," said Kay Herr, chief investment officer of U.S. GFICC at JPMorgan Asset Management.cryptonomist+1

Dollar Weakens, Eyes on Jackson Hole

The U.S. dollar hovered near multi-month lows as the dip in yields weighed on the currency. The euro edged up to $1.1577, approaching a two-month high, while the British pound held at $1.3533 and the yen stabilized around 159.56 per dollar.devdiscourse

Beyond today's minutes, markets are looking ahead to Fed Chairman Kevin Warsh's appearance at the Jackson Hole symposium next week for further guidance on the rate path. Final Eurozone inflation data confirmed Wednesday that annual consumer prices rose 2.9% in July, while U.K. core CPI came in slightly above expectations — developments that underscore the global nature of the inflation challenge central banks continue to face.barchart+1