Global 10-year government bond yields dropped in February amid rising equity market volatility fueled by geopolitical tensions, ongoing uncertainty over monetary and trade policy, and AI concerns. The biggest mover was the U.S. 10-year Treasury yield, which declined by 29.5 basis points to finish the month at 3.96%. Data from the Bureau of Labor Statistics showed that consumer price inflation eased to 2.4% in January, its lowest level since May 2025.

Bhas Nalabothula, Head of U.S. Institutional Rates at Tradeweb, said:

"Uncertainty remains elevated across markets. Tradeweb swap data suggests there is virtually no probability of a rate cut in March. The Fed continues to emphasize caution and a data-dependent approach, though market volatility could still influence the policy path."

In neighbouring Canada, 10-year bond yields ended the month 29 basis points lower at 3.13%. The country's annual inflation rate edged down to 2.3% in January, down from 2.4% in the prior month, while consumer confidence increased to 49.30 points from 46.40 points.

Across the Atlantic, the yield on the 10-year Gilt fell by 29 basis points to 4.23%. The Bank of England left interest rates unchanged at 3.75% in February. Beyond that, market participants said they anticipated a reduction in UK government borrowing, which the government affirmed with a £252.1 billion cut in its spring economic statement.

Elsewhere in Europe, Italy and Germany's 10-year government bond yields decreased by 18 and 15 basis points to close the month at 3.28% and 2.65%, respectively. The European Central Bank maintained interest rates for the fifth time in a row. According to Eurostat, headline Euro-area inflation unexpectedly rose to 1.9% in February, up from 1.7% in January, while core inflation accelerated to 2.4%.

In the Asia Pacific region, Japanese 10-year bond yields touched a 3-year high of 2.29% on February 9, but ultimately fell by nearly 13 basis points over the month to close at 2.11%. The International Monetary Fund has urged Japan to continue hiking rates and avoid reducing the consumption tax, as it would erode fiscal space and add to fiscal risk.

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