Tradeweb Government Bond Update – May 2026

May saw a return to more pronounced moves in global government bond markets, with most 10-year benchmark yields declining by double-digit basis points amid evolving growth and inflation expectations.

Italy's 10-year government bond yield recorded the largest move of the month, dropping by more than 22 basis points to 3.64%. Economic data - including PMIs from S&P Global for Italian manufacturing and services - pointed to resilient activity. Furthermore, revised ISTAT figures showed growth of 0.3% in the first quarter, matching the Q4 2025 figure.

Following closely its Italian equivalent, the Greek 10-year bond yield fell by nearly 22 basis points to 3.48%. The S&P Global Manufacturing PMI for Greece climbed to 53.3 in May, rebounding from a seven-month low of 52.4 in April.

Across the euro area, 10-year benchmark yields moved lower throughout May, with those for Germany finishing the month 10 basis points lower at 2.93%. Data from Destatis showed GDP growth of 0.3% in Q1 2026, in sharp contrast to a decline of 0.3% in Q4 2025. Business activity fell for a second straight month across the services sector; manufacturing stalled, as uncertainty and soaring costs associated with the war in the Middle East acted as headwinds to demand.

The European Commission's Spring Forecast lowered growth expectations and raised inflation projections across several member states, highlighting the continued challenges facing policymakers. Market participants and economists anticipate a rate hike at June's monetary policy meeting, although some policymakers, like ECB Governing Council member Peter Kažimír, have emphasized there's no fixed path and policy will be data dependent.

Roderick Joniaux, Head of European Government Bonds and Supranational Products at Tradeweb, said: "Some of the volatility markets experienced earlier in the year returned in May. There remains considerable uncertainty across global markets, with geopolitical developments continuing to influence growth and inflation expectations. As a result, investors remain highly focused on the outlook for central bank policy."

Outside the euro area, the yield on the UK 10-year Gilt fell nearly 21 basis points to 4.81%. Data from the Office for National Statistics showed Q1 2026 GDP growth increasing by 0.6%, up from 0.2% in Q4 2025. Both the spring forecast from the European Commission and the comparable HM Treasury forecast, which summarizes professional economists' views, highlighted estimates for lower growth and higher inflation.

In Asia Pacific, Australia's 10-year bond yield declined 19 basis points to 4.82%. Unlike other central banks, the RBA held a May meeting, where it hiked its cash rate for the third time in a row, up 25 basis points to 4.35%. The latest PMIs for manufacturing and services in the country from S&P Global showed an increase that moved the sector back into expansion territory, but with notable price and supply disruption.

Bucking the broader trend, Japan's 10-year bond yield climbed nearly 14 basis points to 2.66%. The country's Q1 2026 GDP data came in higher than expected at 0.5%, up from 0.3% in Q4 2025. The S&P Global Manufacturing PMI slipped from April's 51-month high of 55.1 to 54.5 in May. Updated outlooks from the Bank of Japan and the government's cabinet pointed to lower economic growth and higher inflation.

Similarly, the yield on the U.S. 10-year Treasury increased 4.5 basis points to 4.44%, the smallest move in either direction recorded during the month. U.S. economic data remained resilient, with both manufacturing and services activity expanding and first-quarter GDP growth remaining positive. The economy also added 172,000 jobs in May, beating expectations. Meanwhile, the U.S. Senate confirmed Kevin Warsh as the new Fed Chair with 54 votes in favour and 45 against.

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