European government bond yields edged lower on Friday as U.S. Treasury yields stabilized, having hit new multiyear highs earlier in the session.

The 10-year German Bund yield rose to a new 15-year high of 3.515% before reversing to 3.502%, while the 10-year U.S. Treasury yield also moved slightly away from the 5% level, last trading at 4.941%, down 0.2 basis point, according to Tradeweb. The reversal came on the back of declining oil prices, even as Brent remained above $105 a barrel.

Investors were cautious ahead of key U.S. consumer-price inflation data as the probability of the Federal Reserve raising interest rates at its meeting next week increases amid rising inflationary pressures.

Although rising yield levels look increasingly attractive for many investors, caution is warranted until yields settle, Christoph Rieger, head of rates and credit research at Commerzbank, said in a note.

"We maintain a cautious duration stance as the [bond] market is struggling to establish a new range, while oil prices stay under pressure and central banks stick with their laissez-faire attitude toward rising bond yields," Rieger said.

In the U.K., 10-year government bond yields fell 3.6 basis points to 5.334%, having hit a 19-year high of 5.381% on Thursday.

Oil prices could stay elevated, possibly preventing bond yields from falling meaningfully in the near term. Brent crude fell by 2.2% to $105.32 a barrel.

Iran-backed Houthi militants seized the strategic port city of Mokha on Yemen's west coast Thursday, further expanding their control near the Bab al-Mandeb chokepoint for energy exports through the Red Sea. This threatens to disrupt Saudi oil exports while shipping via the Strait of Hormuz remains complicated.

Responding to the inflation risks, the European Central Bank raised interest rates by a quarter point on Thursday, and left the door open for potential further increases. The ECB also raised its inflation forecasts for 2027 and 2028, and raised its GDP forecasts for 2026 and 2027.

"We believe that the current tightening cycle is not yet complete," UBS rates strategists said in a note. "We now expect the ECB to deliver one further 25 basis point rate hike at its December meeting before pausing."

In the U.S. Treasury market, August consumer price inflation data at 1230 GMT is seen as a potential market mover. Higher-than-expected producer price inflation data on Thursday--showing a year-on-year reading of 5.4% versus 5.3% expected by analysts in The Wall Street Journal's poll--raises the risk that the CPI data could also be strong.

Analysts forecast headline annual CPI at 3.4% on year, unmoved from July.

"A reading close to or below expectations could pull [10-year] Treasury yields away from 5%, reduce pressure for an immediate rate increase and allow U.S. and European equity futures to extend their early stabilization," Hassan Fawaz, chairman and founder of GivTrade, said in a note.

A higher-than-expected reading, however, would likely have the opposite effect of "strengthening the dollar, pushing global bond yields higher and renewing pressure on high-duration technology stocks, small caps and rate-sensitive European sectors," he said.