BELGRADE, Aug. 23 (Xinhua) -- Long-term U.S. Treasury yields have climbed to near 20-year highs in recent days, exerting sustained pressure on European bond markets. Although intervention by the U.S. Treasury Department eased selling pressure on U.S. debt for a time, European bonds have remained broadly strained.
On Aug. 21, the yield on the 30-year U.S. Treasury bond, one of the targets of the Treasury's buyback operations, rose to 5.27 percent. Earlier in the week, it had briefly reached 5.34 percent, its highest level since 2007. Yields on major European government bonds rose in tandem. As of Aug. 21, Germany's 10-year yield hovered around 3.25 percent, close to a 15-year high; France's 10-year yield broke above 4.13 percent, the highest since 2008; and Italy's 10-year yield climbed to 4.08 percent.
Several European market institutions believe that volatility in the U.S. Treasury market could continue to affect European financial markets. Britain's Aberdeen Investments said the U.S. Treasury's intervention was a clear signal that the U.S. government is willing to hold down long-term Treasury yields, but noted that such support does not extend to Britain or other European countries, leaving European bonds to weaken to a limited degree.
Guy Miller, chief market strategist at Zurich Insurance Group, said the direction of U.S. Treasury yields is crucial not only for bond markets but also for other financial assets in markets such as Europe, adding that any further upward breakout could undermine market confidence.
Rising U.S. Treasury yields have already affected the asset allocation of European investors. Denmark's Saxo Bank said Treasury yields remain the primary cross-market risk, with high yields and inflation concerns continuing to pressure European technology and financial stocks. Dutch bank ING said European asset managers are insufficiently hedged against the currency risk of their U.S. holdings, and that sharp swings in the Treasury market could further amplify the risks facing European investors.
As for the outlook, Mark Dowding, chief investment officer for fixed income at BlueBay Asset Management, warned that if U.S. economic growth slows and concerns over the sustainability of U.S. government debt intensify, European financial markets could see a sharper correction. ■
