Germany 10-Year Yield Falls After Disappointing US Jobs Data

France’s 10-year OAT yield edged lower toward 4.75%, as investors paused following a sharp rise in inflation concerns and interest rate expectations across the US and Europe earlier in the week. Stronger-than-expected US inflation data pushed Treasury yields higher and strengthened bets on further Fed rate hikes, with the sell-off spreading to European bond markets before stabilizing. Meanwhile, Brent crude traded around $93 a barrel, well below recent highs, while European gas prices also declined amid increased Gulf supplies and easing concerns over a renewed escalation in the conflict. On the monetary policy front, markets are pricing in an 80% chance of a 25-basis-point ECB rate hike in December, with two increases fully priced in by mid-2027. In the US, persistent inflation pressures and hawkish Fed commentary have reinforced expectations of a December rate hike, while raising the possibility of a larger 50-basis-point increase.

Germany’s 10-year Bund yield edged lower, falling below 3.3%, as investors took a breather following a sharp rise in inflation concerns and interest rate expectations across the US and Europe earlier in the week. Stronger-than-expected US inflation data on Tuesday pushed Treasury yields higher and reinforced bets on further Federal Reserve rate hikes, with the sell-off spilling over into European bond markets before yields stabilized. Meanwhile, Brent crude traded around $93 a barrel, well below recent highs, while European gas prices also declined amid increased Gulf supplies and easing concerns over a renewed escalation in the conflict. On the monetary policy front, markets are pricing in an 80% chance of a 25-basis-point ECB rate hike in December, with two increases fully priced in by mid-2027. In the US, the latest inflation data and hawkish Fed commentary have reinforced expectations of a December rate hike, while raising the possibility of a larger 50-basis-point increase.

Germany’s 10-year Bund yield stabilized around 3.3% following Tuesday’s sharp increase, as investors struggled to find direction amid a relatively light Eurozone economic data calendar. Brent crude prices also paused their recent decline following shipping attacks in the Strait of Hormuz, while markets continued to digest hotter-than-expected US inflation figures, which reinforced expectations of further Federal Reserve tightening in December and brought a potential 50-basis-point rate hike into focus. Meanwhile, persistent political and fiscal challenges in France, coupled with uncertainty surrounding the possibility of an early departure by ECB President Christine Lagarde, continued to weigh on sentiment across European markets. On the monetary policy front, ECB Chief Economist Philip Lane suggested that another rate increase in December could be warranted, adding to the growing number of policymakers signaling support for a third rate hike this year.