Government bond markets posted a broadly firmer tone last week, led by the U.S. Treasury curve, where yields fell modestly across maturities. The 2-year and 5-year declined by 2bp each, while the 10-year and 30-year both fell 5bp, to 4.01% and 4.66% respectively. Real yields eased slightly, with the 10-year TIPS rate down 3bp, and breakevens softened by 2bp, signalling marginally weaker inflation compensation. This backdrop supported Treasury ETFs, where performance increased steadily along the curve (from +0.06% in the 1–3y segment to +0.79% in 20y+ exposures).

In Europe, moves were mixed but generally skewed lower at the long end. Bund yields were little changed, with the 10-year down 1bp. French, Italian, Spanish, Portuguese and Irish 10-year yields all compressed between 3–6bp, reflecting a mild risk-on shift and supportive technicals. Correspondingly, EUR government bond ETFs recorded modest gains: +0.15% in the 3–7y bucket, +0.64% in the 10–15y segment and +0.28% for the broad EUR aggregate index. Inflation-linked EUR bonds also advanced (+0.22%).

Elsewhere, UK Gilts outperformed with a notable 11bp rally in the 10-year to 4.44%, while Swiss yields moved slightly higher. Japanese yields extended their upward trend, with the 10y JGP yield up +3bp to 1.81%.

Emerging market

Emerging market (EM) Sovereign and corporate USD bonds gained again last week, supported by tighter credit spreads and a modest decline in U.S. Treasury yields. Ukrainian bonds jumped on renewed peace talks with Russia. Strength was broad-based across EM sovereigns, led by Ivory Coast, Nigeria, Egypt, Turkiye and Mexico.

Global EM debt funds continued to see inflows this year, after three consecutive years of outflows.

In Brazil, the October 2026 election cycle is taking shape. Lula retains a polling lead, bolstered by recent U.S. tariff developments. Washington briefly imposed 50% duties on selected Brazilian goods, reportedly tied to pressure over Bolsonaro’s release, before rolling back most agricultural tariffs on coffee, beef, cocoa, and fruit ahead of Thanksgiving. Combined with Lula’s firm stance toward Trump, the reversal lifted his public support. He enters the Presidential race with an advantage, though balancing growth, inflation, and fiscal consolidation remains critical. Softer inflation can potentially allow a cumulative 300 basis point SELIC policy rate cut (from 15% to 12%), supporting the economy.

In China, property-sector risks persist. Even Vanke—partially owned by Shenzhen Metro—has sought bondholder consent to delay repayment on an onshore bond. Housing data continue to deteriorate, with price declines across both upper- and lower-tier cities, and banks reportedly listing more foreclosed properties. The likelihood of another policy-easing round is rising.

Performance was positive across the board: EM hard-currency debt advanced (iShares EM Sovereign USD Bond ETF +0.6%), local-currency bonds outperformed (J.P. Morgan EM Local Currency ETF +1.1%), EM corporates gained +0.3%, while Asian high yield was flat.

EM corporates enter 2026 on solid ground, supported by healthy credit fundamentals, modest capex needs, manageable maturities, and steady access to local funding. EM GDP growth is expected to remain resilient with a moderate acceleration in 2026, strong in the Middle East and Africa, but softer across Latin America and Eastern Europe. Against this favourable backdrop, net financing needs should remain low, a supporting anchor for EM credit performance.