Germany’s 10-Year Bund Yield Falls to Two-Month Low

Germany’s 10-year Bund yield dropped to 2.75%, its lowest level since December 3, and is on track for its strongest weekly performance since April. Benchmark borrowing costs are also set for an eighth consecutive daily decline, the longest losing streak since 2024, as investors seek safer assets amid weakening risk sentiment and as softer-than-expected US inflation data reinforce expectations that the Federal Reserve may have scope to resume interest rate cuts. In Europe, investors assessed signals that the ECB remains largely at ease with the euro’s recent appreciation. Markets also digested reports that Bank of France Governor François Villeroy de Galhau, considered a dovish policymaker, could step down earlier than planned. ECB President Christine Lagarde reiterated last week that the inflation outlook is in a “good place,” while playing down concerns over the strength of the single currency. Meanwhile, money markets are pricing in only a 30% chance of an ECB rate cut by December.

Germany’s 10-year Bund yield slipped toward 2.75%, marking its lowest level since December 4. The benchmark was also poised for a weekly decline of around 9 bps, its sharpest drop since April, as investors positioned themselves ahead of key US CPI data due later in the day, which could provide fresh signals on the Federal Reserve’s policy path. In Europe, market participants weighed indications that the European Central Bank remains broadly comfortable with the euro’s recent appreciation. Attention also turned to reports that Bank of France Governor François Villeroy de Galhau, widely regarded as dovish, is set to step down earlier than anticipated. Meanwhile, ECB President Christine Lagarde said last week that the inflation outlook remains in a “good place,” downplaying concerns about the strength of the single currency. Money markets are currently pricing in just a 30% probability of an ECB interest rate cut by December.

Germany’s 10-year Bund yield rebounded to 2.8% after briefly hitting a four-week low of 2.793%, as investors scaled back expectations for Federal Reserve rate cuts following stronger-than-expected US employment data. US payrolls rose by 130,000 in January, the largest gain in over a year, while the unemployment rate unexpectedly fell to 4.3%, pointing to continued labor market resilience at the start of 2026. Markets now fully price in a Fed rate cut by July instead of June, with the probability of a March move seen below 5%. In Europe, investors also assessed signals that the European Central Bank remains largely comfortable with the euro’s recent appreciation, as well as reports that Bank of France Governor François Villeroy de Galhau, considered dovish, will step down earlier than planned. ECB President Christine Lagarde said last week that the inflation outlook remains in a “good place,” while downplaying concerns over the strength of the single currency.