German Bund Yields Slide to One-Month Low

Germany’s 10-year Bund yield slipped to around 2.82% after the European Central Bank kept interest rates unchanged at its first policy meeting of 2026, as widely expected, and reaffirmed that inflation should converge toward its 2% target over the medium term. The ECB said the euro area economy remains resilient, but warned that the outlook is clouded by global trade policy uncertainty and ongoing geopolitical tensions. At the ECB press conference, President Lagarde reiterated that both the central bank and the euro area inflation outlook are in a “good place,” while cautioning that inflation readings may fluctuate in the months ahead and stressing that policy decisions should not hinge on any single data release. Earlier, Eurostat data showed headline inflation slowed to 1.7% year on year in January, matching expectations and marking the lowest reading since September 2024, while core inflation eased to 2.2%, slightly below forecasts and its weakest level since October 2021.

Germany’s 10-year Bund yield was little changed at 2.87%, hovering near the March 2025 peak just above 2.9%, as investors awaited the ECB’s policy decision later today and digested prospects of heavy debt issuance. Germany plans to raise a record €512 billion this year to finance infrastructure upgrades and increased defense spending. The ECB is widely expected to leave interest rates unchanged for a fifth straight meeting, with policymakers likely focusing on the deflationary effects of a stronger euro and low-priced Chinese imports. ECB President Christine Lagarde is expected to reiterate that policy remains in a “good place,” with markets pricing in steady rates through 2026. Recent data showed eurozone inflation cooled sharply in January, with headline CPI easing to 1.7%, the lowest since September 2024, and core inflation unexpectedly falling to 2.2%, its lowest level since October 2021.

Germany’s 10-year Bund yield dipped to 2.87% as investors absorbed signs of slowing inflation across the eurozone. January’s CPI eased to 1.7%, well below the ECB’s target, while core inflation unexpectedly fell to 2.2%, its lowest level since October 2021, raising concerns among policymakers about the euro’s rapid appreciation and the potential resumption of rate cuts paused in June. The ECB is set to announce policy on Thursday, widely expected to keep rates on hold for a fifth consecutive meeting, with officials likely to assess the deflationary impact of a stronger euro. ECB President Christine Lagarde is expected to reiterate that policy remains in a “good place,” with markets pricing in steady rates through 2026. Despite the recent dip, Bund yields remain near the March 2025 peak just above 2.9%, supported by a surge in debt issuance as Germany plans to raise a record €512 billion this year to fund infrastructure projects and boost defense spending.