Euro zone yields edge up as Nvidia emboldens investors; long-dated bonds wilt

Euro zone bond yields rose on Thursday, after investors used upbeat results from AI bellwether Nvidia to swoop back into risk assets like stocks, ahead of delayed U.S. jobs data that could set the tone for Treasuries and the wider fixed income market for the coming weeks.

Euro zone bond yields rose on Thursday, after investors used upbeat results from AI bellwether Nvidia to swoop back into risk assets like stocks, ahead of delayed U.S. jobs data that could set the tone for Treasuries and the wider fixed income market for the coming weeks. With investors feeling more positive, for now, about the resilience of the stock market and the AI story that underpins it, bonds have come under pressure. This has come particularly at the longer end of the curve, where yields in Japan have hit record highs, while those on UK and U.S. debt have cranked to their highest in over six weeks.

Long-dated German bond yields have been no exception, with 30-year debt now at 3.34%, at its highest since late September. The benchmark German 10-year Bund yield was up 1.3 basis points at 2.72%, around its highest since late September and set for a fifth consecutive weekly rise. Two-year Schatz yields were flat at 2.02%, having declined by around 1.1 bp this week, in contrast with the 2.9 bps rise in 30-year yields, a dynamic known as curve steepening.

EYES ON US JOBS DATA With nothing market-moving on the European data docket on Thursday, investor attention was pinned on September's U.S. jobs report, delayed by the 43-day government shutdown, which is expected to show the U.S. economy added jobs at a moderate pace.

"Today the focus would be on the September payroll report. Even though it's old, market would be watching for any clues around the health of the U.S. employment picture," said Mohit Kumar, chief economist at Jefferies. "Both a too high or a too low number would be perceived as negative by the market," Kumar said, adding that close to a consensus of 51,000 of nonfarm payroll gains would be the sweet spot.

Although backward-looking, the data could help the Federal Reserve decide whether to continue with interest rate cuts next month or take a pause. The European Central Bank, in contrast, is not expected to move rates at all in the coming year, based on the swaps market. Against that backdrop, the yield premium U.S. 10-year Treasuries command over 10-year Bunds has been hovering around 141 bps, not far off September's near-two-year low around 135 bps.

France and Spain both came to market with new debt. Spain sold around 4.9 billion euros in longer-dated bonds to very strong demand, while France sold 12 billion euros spread across three- to six-year bonds and another 1 billion euros in long-dated inflation-linked paper, according to analyst estimates. ($1 = 0.8684 euros)

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