LONDON – US Treasury bond yields slipped from multi-year highs on Thursday and equities showed signs of steadying after Federal Reserve minutes released the previous day did nothing to add to the rate-hike momentum already priced into markets.

Ten-year Treasury yields, the benchmark for global borrowing costs, have risen around 20 basis points this month, adding to a 50 bps surge in March. Shorter-maturity yields which are more sensitive to interest rate expectations, have jumped even more.

Those moves, driven by expectations of faster policy tightening by the Federal Reserve and other central banks have weighed on stock markets, pushing MSCI's global equity index down 7 percent this year, while the Nasdaq US tech benchmark has lost more than 11 percent.

Asian shares earlier on Thursday took their cues from Wall Street's selloff and fell to one-week lows while Japan's Nikkei index dropped 1.7 percent.

But markets gradually steadied, and a pan-European stock index rose 0.4 percent, while futures for the Nasdaq, which fell 2.4 percent on Wednesday, was up 0.3 percent by 0730 GMT.

Minutes of the Fed's March 15-16 meeting revealed concern that inflation had broadened through the economy and suggested its balance sheet reduction could start next month. 

But comments earlier this week by Fed governor Lael Brainard had already cemented expectations of a faster stimulus withdrawal

"(Fed chairman Jerome) Powell had already put 50 bps on (the) table for the next meeting, then we had Brainard's speech so there were no additional surprises in the minutes," said Thomas Costerg, senior economist at Pictet Wealth Management.

He said, however, markets would remain on tenterhooks and watch out for data such as March inflation figures — expected next week at 8.3 percent.

"The question is to what degree the Fed will be willing to kill growth. My fear is (they) may not be as sensitive to weak growth as they were expected to be."

Ten-year Treasury yields slipped 4.5 bps to 2.564 percent, easing from a three-year peak around 2.66 percent touched on Wednesday. The 2-year note yield fell over 5 bps to 2.43 percent

The gap between the two- and 10-year segments was at the widest in a week, reversing the inversion that is seen as a recession signal .

With the Fed leading the policy tightening momentum among major central banks, the dollar stayed near two-year highs against a basket of currencies though it retreated from an overnight peak of 99.778.

Contrast

The US economic and interest rate picture is somewhat at divergence with some other big economies.

The euro was close to one-month lows, pressured by what ING analysts called a "double threat" from the economic impact of new sanctions on Russia and uncertainty about the outcome of the French election.

France votes on Sunday in the first presidential election round and while incumbent Emmanuel Macron is likely to re-take the presidency, his far-right opponent Marine Le Pen has been closing the gap, recent opinion polls show.

With her policies seen driving up France's fiscal deficit, the premium investors demand to hold French government bonds over German debt has risen to 55.3 bps, the highest since 2020 . French 10-year yields hit their highest levels since 2015 on Wednesday .

French stocks rose 0.4 percent on Thursday after sharp falls earlier this week.

"If France elects an inexperienced and populist president, France and the EU would face a major upset almost comparable to the surprise win of Donald Trump in the 2016 US elections," Berenberg analysts wrote.

Le Pen's agenda of protectionism, reform rollbacks, and anti-immigration stance would likely trigger conflict with the European Union, they warned.