Tradeweb Government Bond Update – May 2025
May was a mixed month for global government debt markets, with 10-year benchmark bond yields either increasing and decreasing depending on the issuer. The biggest mover was the yield on the U.S.10-year Treasury note, which rose 24 basis points during the month to 4.42%. According to data published by the U.S. Bureau of Labor Statistics on May 13, the country’s annual inflation rate eased to 2.3% in April, the lowest since February 2021.
Amid evolving tariff and trade policies in the U.S. dominating the manufacturing landscape, the S&P Global U.S. Manufacturing PMI rose to 52 in May from 50.2 in the previous two months. On May 12, President Donald Trump announced an agreement to reduce tariffs for the U.S. and China by 115%.
In Japan, while the yield on the 10-year Japanese government bond rose by almost 20 basis points to 1.51%, it was longer-term rates that saw record movements during the month.
Taichi Shibuya, Head of Japan at Tradeweb, said: “On May 22, 30- and 40-year JGB yields hit record highs of 3.16% and 3.67%, respectively, following a weak 20-year debt auction and amid ongoing lack of demand in the super long-end. At its May meeting, the Bank of Japan voted to maintain its key short-term interest rate at 0.5%, while the country’s Core CPI rate remained unchanged at 3.5% in April.”
The Australian 10-year benchmark bond yield rose 19 basis points to 4.25% at month-end. On May 20, the Reserve Bank of Australia cut its interest rate to 3.85%, the first rate cut since January. The country’s inflation rate registered at 2.4% in Q1 2025, unchanged from the previous quarter.
Over in Europe, it was the UK 10-year Gilt that saw the biggest yield move in the region, increasing by over 21 basis points to 4.67%. On May 8, the UK was the first country to agree a trade deal with the U.S., following the imposition of sweeping tariffs in April on ‘Liberation Day’. The agreement includes a reduction in car export tariffs to 10%, and the elimination of tariffs on steel and aluminium. On the same day, the Bank of England cut interest rates to 4.25%, while the Office for National Statistics announced on May 21 that the annual inflation rate in the UK had jumped to 3.5% in April, the highest reading since January 2024. The GfK's Consumer Confidence Index rose by three points to -20 in May, and the S&P Global UK Manufacturing PMI rose to a three-month high of 46.4 in the same month.
In Germany, the 10-year Bund yield rose six basis points to 2.51%. The country’s inflation rate stayed the same at 2.1% in May, and similarly, its unemployment rate remained at 6.3%, the highest since September 2020. The HCOB Germany Manufacturing PMI decreased slightly to 48.3 at the end of May, marking the 35th month of consecutive contraction in the manufacturing sector.
In contrast to its German equivalent, the Italian 10-year government bond declined nine basis points to 3.49%. The annual inflation rate in Italy decreased slightly to 1.7% in May from 1.9% in the month prior. Meanwhile, the yield on France’s 10-year benchmark bond remained unchanged at the end of May at 3.17%. According to preliminary estimates, the annual inflation rate eased to 0.7% in May from 0.9% in the prior two months, marking the lowest level since February 2021.
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