Eurozone government bond yields fell on Friday due to a retreat in oil prices, while U.S. Treasury yields mostly edged higher as markets priced in significant interest-rate hikes by the Federal Reserve.

Following last week's 25-basis-point interest-rate rise, which brought the fed funds target rate range to 3.75%-4.00%, money markets currently price in a 71% probability of another 25-basis-point rate hike in October, according to LSEG.

"We start the final day of the week with some respite for fixed income markets," Derek Halpenny, head of research at MUFG, said in a note. "Yields are currently very tightly correlated with crude oil prices."

The price of Brent crude oil fell 0.4% to $106.17 a barrel on prospects of a possible agreement between the U.S. and Iran on a gradual reopening of the Strait of Hormuz.

"A pullback in oil prices helped stabilize the situation," said Patrick Munnelly, market strategist at Tickmill Group.

The 10-year Treasury yield last traded 0.7 basis point higher at 5.169% but remained below Thursday's intraday high of 5.225%, the highest level since mid-2007, according to Tradeweb data.

The 30-year Treasury yield was steady at 5.460%, below Thursday's peak of 5.502%, the highest since 2004.

The 10-year German Bund yield fell 1.7 basis points to 3.589%.

Still, U.S. and eurozone government bond yields remain at risk of rising further.

"The 10-year Treasury yield is being pushed higher by a confluence of factors: stronger economic data, heightened Middle East tensions, discussion of a potential diesel export ban, and a weak five-year Treasury auction," said Mike Sanders, head of fixed income at Madison Investments.

"The combination of fiscal, economic, geopolitical, and supply-side inflation pressures converging has bond markets in less familiar territory," he said, adding that the recent rise in yields can no longer be attributed simply to concerns over the fiscal deficit.

The Fed's decision last week to raise rates by 25 basis points reinforces a reality bond investors have been confronting for much of 2026: rates have moved meaningfully higher, and the path lower remains uncertain, Karen Manna, fixed income strategist at Federated Hermes, said in a note.

Multiyear high U.S. Treasury yields reflect resilient economic growth, persistent inflation concerns, elevated fiscal deficits and a market that continues to reassess where "normal" interest rates should reside, she said.