Bund Yields Near 15-Year High as ECB Rate Hike Bets Rise

The 10-year Bund yield edged lower to 3.48%, as German government bonds continued to benefit from safe-haven demand despite a rebound in oil prices. Brent crude rose following a deadly attack on Riyadh’s airport in Saudi Arabia, while Ukraine reported continued Russian attacks on its energy infrastructure. European bond yields remain close to multi-year highs amid persistent energy-driven inflationary pressures, resilient economic activity and concerns over France’s public finances. The country’s minority government aims to reduce the fiscal deficit to 5% of GDP in 2027, although securing parliamentary support for spending cuts remains uncertain ahead of next year’s presidential election. German politics also remained in focus after Bärbel Bas announced her resignation as Labour Minister and SPD leader. Investors are now awaiting Wednesday’s US CPI report and remarks from ECB policymakers at this week’s IMF-World Bank meetings for further clues on the monetary policy outlook.

Germany’s 10-year Bund yield slipped to 3.46%, near its lowest level in over a week, as easing oil prices and reduced concerns over Middle Eastern supply disruptions prompted investors to scale back expectations for further ECB tightening. Safe-haven demand also supported German government bonds. European bond yields nevertheless remain elevated amid signs of economic resilience, persistent energy-driven inflationary pressures, and concerns over France's public finances. The country's minority government seeks to reduce its deficit to 5% of GDP in 2027, despite uncertainty over parliamentary support for spending cuts ahead of next year’s presidential election. German politics also drew attention after Bärbel Bas announced her resignation as Labour Minister and SPD leader. Investors are now awaiting Wednesday’s US CPI report and remarks from ECB policymakers at this week’s IMF-World Bank annual meetings for clues on the monetary policy outlook.

Germany’s 10-year Bund yield eased to 3.45%, moving further away from a 17-year high touched in late September, supported by falling oil prices and safe-haven demand. Brent crude retreated from recent highs as concerns over Middle Eastern oil supplies eased after US President Donald Trump said Washington would not launch an attack on Iran before the November midterm congressional elections, citing productive talks aimed at ending the conflict. Markets also scaled back expectations for ECB tightening, with the deposit rate now priced to rise from 2.50% currently to 2.72% by December and 3.20% by late 2027. Before the recent widening in bond spreads, investors had anticipated roughly one additional rate hike in early 2027. Meanwhile, borrowing costs and risk premiums on French and Italian government debt declined after rising sharply last week, as investors reassessed fiscal and political risks across the euro area.