US Treasuries Pause as Record Bond Inflows Absorb Supply

U.S. Treasury yields held steady near multi-decade highs while French debt yields retreated from sharp session highs, supported by record weekly inflows into domestic bond funds and stabilizing international fixed-income markets. The pause in sovereign debt selloffs comes as investors weigh cooling labor metrics against escalating fiscal strain across European economies.

"The initial response appears to have been running for cover (to the benefit of Bunds and USTs) rather than an outright contagion," according to Vishnu Varathan, Mizuho's head of macro strategy for Asia Pacific, in a Business Insider report.

Record Inflows Absorb U.S. Supply Pressures

Fixed-income demand surged as U.S. bond funds recorded a weekly record of $19.78 billion in net inflows. Investors poured $6.76 billion specifically into short-to-intermediate government and Treasury funds, helping absorb recent debt issuance despite elevated benchmark rates.

The benchmark U.S. 10-year Treasury yield held near its highest levels since 2007, standing around 5.231% to 5.276%, according to data cited by Yahoo Finance. Meanwhile, the two-year Treasury yield edged to a range of 4.774% to 4.818% as markets processed shifting economic indicators.

French Yields Retreat From Volatile Peak

European debt markets experienced pronounced volatility following fiscal concerns in Paris. France's two-year Treasury yield pulled back to 3.666% after surging almost 76 basis points earlier in the session to touch 4.467%, while the 10-year OAT yield eased to a range of 4.834% to 4.897%.

Simultaneously, the cost of insuring French sovereign debt against default climbed to multi-year peaks. Five-year credit default swaps (CDS) traded around 87 basis points, marking their highest level since 2013, according to Yahoo Finance reporting.

Political Response and Deficit Targets

To calm volatile trading desks, far-right leader Marine Le Pen unveiled a budget plan aiming to slash France's public deficit to 3.0% of GDP by 2030. The proposal targets €140 billion in net spending cuts, though financial markets met the announcement with skepticism regarding its implementation timeline.

What is at stake for global capital markets is the broader contagion risk from European fiscal distress into U.S. and Asian debt instruments. As sovereign borrowers navigate high interest rate environments and domestic spending pressures, massive liquidity inflows into safe-haven assets remain a critical buffer against sudden yield spikes.