Tradeweb Government Bond Update – April 2025

March's sell-off trend in global government debt markets was reversed in April, with 10-year benchmark bond yields decreasing across the board, except those for Canada. The month began with the U.S. administration announcing sweeping tariff hikes on April 2, a day President Donald Trump called 'Liberation Day'. According to the Bureau of Economic Analysis, U.S. GDP contracted at a 0.3% rate in the first quarter of 2025, while the annual inflation rate eased for the second consecutive month to 2.4% in March.

Casey Costanza, Managing Director, U.S. Treasuries Product Manager, said: "During the month, financial markets experienced one of the most significant periods of volatility in years. The U.S. 10-year Treasury yield dropped to 3.99% in the two days following the global tariff announcement, before climbing 50 basis points to 4.49% on April 11, and then coming back down to 4.17% at month-end."

In contrast to its U.S.- counterpart, the Canadian benchmark note yield rose by 12 basis points to 3.09%. On April 16, the Bank of Canada announced that it would be leaving its interest rate unchanged at 2.75%. The annual inflation rate fell to 2.3% in March from an eight-month high of 2.6% in February.

Across the Atlantic, the yield on Germany's 10-year Bund dropped 28 basis points to 2.45%. Preliminary estimates showed Germany's inflation rate eased for a second consecutive month to 2.1% in April, the lowest reading since October 2024. The HCOB Germany Manufacturing PMI decreased slightly to 48 in April from 48.3 in the previous month.

In Greece, S&P Global Ratings announced on April 18 that it had upgraded the country's credit rating to 'BBB' from 'BBB-' with a stable outlook, citing 'efforts to improve tax compliance, combined with resilient economic growth'. The annual inflation rate decreased slightly to 2.4% in March, the lowest level in four months. The Greek government bond yield fell by 25 basis points to 3.26% at the end of April.

Similarly, its Italian equivalent declined 29 basis points to 3.58% at month-end. The annual inflation rate in Italy edged higher to 2% in April from 1.9% in March, in line with market expectations. Conversely, the consumer confidence index eased to 92.5 in April from 95 in the previous month, lower than market forecasts of 94.

In neighbouring France, the yield on the 10-year government bond slipped by 28 basis points to 3.17%. The annual inflation rate remained stable at 0.8% in April for the third month in a row, and at its lowest point since February 2021.

Over in the UK, the 10-year Gilt yield finished April 23 basis points lower at 4.45%. The annual inflation rate slowed to 2.6% in March from 2.8% in February, which is below the Bank of England's forecasts of 2.7%. The GfK Consumer Confidence fell by four points to -23 in April, while in the same month, the S&P Global UK Manufacturing PMI registered at 45.4, slightly higher than March's 17-month low of 44.9.

In Asia Pacific, the Japanese 10-year government bond yield decreased by 18 basis points to 1.31%. Japan's annual inflation rate inched down to 3.6% in March from 3.7% the month before, reaching its lowest level since last November. At the end of its two-day monetary policy meeting commencing on April 30, the Bank of Japan decided to hold interest rates at 0.5% for the second time in a row.

Meanwhile, the Reserve Bank of Australia maintained its cash rate at 4.1%, and the Westpac-Melbourne Institute Consumer Sentiment Index dropped to a six-month low of 90.1 in April. The yield on the country's 10-year benchmark note declined 30 basis points to 4.06% at month-end.

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