There is a bit of a welcome relief in global bonds to start the new week, particularly in Europe after Moody’s affirmed France’s Aa3 credit rating.
Meanwhile, Treasury yields have also settled down a fair bit after an extremely volatile period earlier this month
But in looking at where things are right now, there is still plenty of tension lurking beneath the surface. For one, 10-year Treasury yields are still sitting just below the 5% mark for the time being. And over in Europe, the France-Germany 10-year yield spread remains at levels that would have surely been alarming just a few months ago.
So while the selling pressure in the bond market has eased for now, the underlying concerns haven’t really changed all that much. And as much as that offers some breathing room for broader markets, there are still plenty of reasons to be cautious. The Fed decision tomorrow is one obvious catalyst, even if policymakers are widely expected to leave interst rates unchanged.