European bond markets tentatively rebounded in early trading this morning following the US Federal Reserve’s biggest interest rate cut for more than a century to thwart the onset of a recession and stymie the potential unravelling of the fragile bond insurance sector.

Eurozone government bond yields continued to climb, tracking US Treasuries or US government bonds, while corporate credit spreads or risk premiums traded lower after the Fed surprised the markets yesterday with a 75 basis point cut in interest rates to 3.5%.