Key Takeaways
- US 30-year Treasury yields surged 5 basis points to 5.70%, marking the highest level since 2002 as a global bond selloff deepens.
- The French government is prepared to bypass parliament using special constitutional powers to force through billions in spending cuts to address its ballooning debt.
- ECB Governing Council member Primož Dolenc stated that current interest rate levels provide "ample flexibility" for future policy decisions amid persistent inflation.
- GlobalWafers (6488) reported a 13.1% decline in September sales, reflecting continued softening in the semiconductor materials market.
US Treasury Yields Reach Multi-Decade Highs
The US 30-year Treasury yield climbed to 5.70% on Wednesday, a level not seen in 24 years. This latest spike follows a relentless selloff in the $32 trillion Treasury market, driven by a combination of rising energy costs, heavy government bond issuance, and expectations that the Federal Reserve will keep interest rates higher for longer.
Market participants are increasingly concerned about the "higher-for-longer" narrative as oil prices remain volatile due to geopolitical tensions. Analysts at Goldman Sachs (GS) noted that investors are demanding higher compensation to hold long-term debt, with some now eyeing the 6.0% milestone for the 10-year yield if inflationary pressures do not abate.
France Considers Constitutional Bypass for Budget Cuts
In Europe, the French government has signaled it is willing to exercise Article 49.3 of the constitution to bypass parliamentary approval for its 2027 budget. Finance Minister Roland Lescure indicated that the move may be necessary to secure €43 billion to €54 billion in spending cuts if negotiations with opposition parties stall.
The proposed austerity measures aim to reduce France's budget deficit to 5% of GDP, down from current elevated levels. However, the move carries significant political risk, as it typically triggers a no-confidence motion that could threaten the government's survival. Markets are closely monitoring the OAT-Bund spread for signs of fiscal instability.
ECB Maintains Policy Flexibility
European Central Bank (ECB) official Primož Dolenc emphasized on Wednesday that the current restrictive interest rate environment gives policymakers the "flexibility" needed to navigate economic uncertainty. The ECB recently raised its deposit rate to 2.50% in September, its second hike of 2026, to combat inflation fueled by the Middle East energy shock.
While the ECB remains data-dependent, futures markets are currently pricing in a 60% chance of another 25-basis-point hike at the October 29 meeting. The central bank's staff projections now see headline inflation averaging 3.0% in 2026, well above the 2% medium-term target.
GlobalWafers Sales Slump Amid Tech Softening
In the corporate sector, GlobalWafers (6488) reported September revenue of NT$5.13 billion, representing a 13.1% year-over-year decline. The drop highlights the ongoing challenges in the semiconductor supply chain as demand for non-AI related chips remains sluggish.
The divergence in the tech sector was further evidenced by the PHLX Semiconductor Index falling roughly 0.7% earlier this week, even as the Nasdaq Composite hit record highs. Investors remain cautious as high borrowing costs begin to squeeze capital expenditure across the broader technology landscape.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.