By Sujata Rao

LONDON (Reuters) -U.S. Treasury bond yields slipped from multi-year highs on Thursday, offering some respite to equities after Federal Reserve minutes released the previous day reinforced the rate-hike momentum already priced into markets.

Ten-year Treasury yields, the benchmark for global borrowing costs, have risen around 20 basis points (bps) this month, adding to a 50 bps surge in March. Shorter-maturity yields, which are more sensitive to interest rate expectations, have jumped even more.

Those moves, driven by expectations of faster policy tightening by the Federal Reserve and other central banks, have weighed on stock markets, pushing MSCI’s global equity index down 7% this year, while the Nasdaq U.S. tech benchmark has lost more than 11%.

Asian shares fell earlier on Thursday, taking their cues from Wall Street’s selloff <.MIAPJ0000PUS>. But markets gradually steadied, and by 1030 GMT a pan-European stock index rose 0.6%, while futures for the Nasdaq, which fell 2.4% on Wednesday, were up 0.5%.

Futures for the S&P 500 were up 0.3%.

Minutes of the Fed’s March 15-16 meeting revealed concern inflation had broadened through the economy and suggested its balance sheet reduction could start next month.

But comments earlier this week by Fed governor Lael Brainard had already cemented expectations of a faster stimulus withdrawal.

“(Fed chairman Jerome) Powell had already put 50 bps on (the) table for the next meeting, then we had Brainard’s speech so there were no additional surprises in the minutes,” said Thomas Costerg, senior economist at Pictet Wealth Management.

However, he said markets would remain on tenterhooks and closely watch data such as March inflation figures — expected next week at 8.3%.

“The question is to what degree the Fed will be willing to kill growth. My fear is (they) may not be as sensitive to weak growth as they were expected to be.”

Ten-year Treasury yields slipped three bps to 2.57%, off a three-year peak around 2.66% touched on Wednesday. The 2-year note yield fell almost seven bps to 2.43%.

The gap between the two- and 10-year segments was at the widest in a week, reversing a recent inversion that is often seen as a recession signal.

With the Fed leading the policy tightening momentum among major central banks, the dollar stayed near two-year highs against a basket of currencies.

CONTRAST

The U.S. economic and interest rate picture is somewhat at divergence with some other big economies.

The euro was close to one-month lows, pressured by what ING analysts called a “double threat” from the economic impact of mounting sanctions on Russia and uncertainty about the French election. [FRX/]

France votes on Sunday in the first presidential election round and while incumbent Emmanuel Macron is likely to re-take the presidency, his far-right opponent Marine Le Pen has been closing the gap, opinion polls show.

“If France elects an inexperienced and populist president – who has in the past showed sympathies for Russian president Vladimir Putin – France and the EU would face a major upset almost comparable to the surprise win of Donald Trump in the 2016 U.S. elections,” Berenberg analysts wrote.

With Le Pen’s policies seen driving up France’s fiscal deficit, the premium investors demand to hold French government bonds over German debt is at the highest since 2020. French 10-year yields hit their highest levels since 2015 on Wednesday.

French stocks rose 0.6% on Thursday after sharp falls earlier this week.

Increasing COVID-19 cases and lockdowns in China sent Shenzen and Hong Kong stocks 1.3% lower.

Nomura estimates 23 Chinese cities, accounting for 22% of the country’s GDP, have implemented either full or partial lockdowns.

That includes Shanghai, which reported nearly 20,000 new cases on April 6.

Wouter Sturkenboom, chief EMEA and APAC investment strategist, said that justified cutting portfolio risk.

“We do worry that China will not be able to keep the disruption at bay given how high COVID levels are there,” he told a webinar.

(Reporting by Sujata Rao; additional reporting by Alun John in Hong Kong and Dhara Ranasinghe in London; Editing by Kim Coghill)