European bonds advanced, supported by safe-haven demand, as the latest threat to the Federal Reserve's independence triggered a sell-off in US Treasuries. The yield on the ten-year German government bond fell by 2 basis points to 2.84%; in contrast, the yield on the ten-year US Treasury note rose by 2 basis points to 4.18%. This widened the yield spread between the two countries' bonds to its highest level since late November. US Treasuries faced downward pressure after Federal Reserve Chairman Jerome Powell disclosed that the institution had received a grand jury subpoena from the Department of Justice, sparking market concerns over the Fed's independence. French government bond yields edged lower, unaffected by warnings from the country's budget minister; the minister cautioned that if a no-confidence vote in parliament overthrows the government, a budget might not be passed until March. The spread between French and German 10-year government bond yields held near 66 basis points, a level touched last week and the narrowest since mid-August. The euro interest rate swap curve flattened, following an announcement from the Netherlands' second-largest pension fund that it would implement more hedging on its fixed-income positions than expected under a new retirement investment system. UK government bonds were largely flat, with the 10-year yield holding at 4.38%. Market Snapshot: The German 10-year bond yield decreased by 3 basis points to 2.84%. The German bond futures contract rose by 24 ticks to 128.19. The Italian 10-year government bond yield fell by 3 basis points to 3.46%. The Italy-Germany government bond yield spread narrowed by 1 basis point to 63 basis points. The French 10-year government bond yield declined by 2 basis points to 3.50%. The UK 10-year government bond yield was essentially unchanged at 4.38%.
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