European session: Dollar strengthens as Treasury yields near 2002 peaks

European session wrap: Dollar firms as Treasury yields threaten fresh 2002 highs

Headlines:

Markets:

• 10-year Treasury yields off 1 bps to 5.28%
• AUD strongest, JPY weakest on the session
• WTI crude climbs 1.5% to $91.80
• Gold adds 0.6% to $4,182
• European benchmarks lower; S&P 500 futures up 0.4%
• Bitcoin edges up 0.3% to $83,921

October trading in Europe started with a turbulent session, as bonds kept broader markets on tenterhooks.

After dipping slightly in Asia to 5.28%, 10-year Treasury yields bounced back during the earlier part of the session to 5.33%, marking their highest point since 2002.

European indices saw losses deepen as a result, while S&P 500 futures briefly erased their earlier advance. But with yields now retreating to 5.28%, steep losses in Europe are easing somewhat, and S&P 500 futures are climbing again on the day.

The bond market remains the dominant focus at this juncture.

As yields pushed higher earlier, the dollar picked up strong demand, sending EUR/USD to a three-month low. The pair broke under the 1.1300 support zone, reaching 1.1265 before recovering towards the round number as yields cooled.

A rebound in oil prices is adding to the uneasy market mood. WTI crude rose 1.5% to $91.80 on the day, while Brent crude is threatening a renewed push back above the $100 mark.

Once again, the uncomfortable mix of higher oil prices and elevated bond yields is weighing on risk appetite.

European major indices struggled early on, falling more than 1% across the board. The DAX has since recovered most of that drop, but the CAC 40 has only halved its loss as midday passes in London.

Gold, meanwhile, is holding onto its earlier bounce around $4,182. Still, the precious metal lacks conviction for a stronger move back above $4,200.

For now, the bond market continues to drive the broader market direction. That will remain the case heading into tomorrow's US jobs report, which will present another major test for yields and wider markets.