German Bund Yields Near September Lows

Germany’s 10-year Bund yield hovered around 3.35%, near its lowest level since early September, as demand for safe-haven assets increased amid concerns that the Middle East conflict could persist despite ongoing negotiations. Investors also remained cautious ahead of the European Central Bank’s policy decision and key inflation and GDP data due later this week. The ECB is widely expected to leave interest rates unchanged amid signs of slowing economic growth, keeping markets focused on its forward guidance. Friday’s GDP figures are expected to show weaker German economic growth, while inflation is also forecast to ease following the introduction of a fuel-tax rebate. Meanwhile in the US, the Federal Reserve is likewise expected to keep rates steady this week. However, markets are pricing in potential rate hikes from both central banks in December.

European government bonds traded mixed, with Germany’s 10-year Bund yield rising to 3.37% as safe-haven demand weakened, while France’s 10-year yield retreated below 5% as selling pressure eased following Moody’s decision to maintain the country’s sovereign credit rating. A modest decline in oil prices also supported European bonds, as investors turned their attention to upcoming policy decisions from the European Central Bank and the US Federal Reserve. The ECB is widely expected to hold interest rates steady amid slowing economic momentum, with investors looking for clues on its future policy path. Eurozone GDP data due Friday are expected to show weaker growth, while inflation trends remain mixed, with Germany’s fuel-tax rebate and easing Spanish inflation likely to temper price pressures. The Fed is also expected to leave rates unchanged this week, with markets pricing in rate hikes from both central banks only in December.

Germany’s 10-year Bund yield eased to around 3.34%, touching its lowest level since August 31, as investors sought safe-haven assets amid mounting fiscal concerns and political uncertainty in France and other highly indebted eurozone economies. Meanwhile, fresh PMI data showed eurozone private-sector growth slowed to a four-month low in October, pressured by rising energy costs, higher interest rates and renewed contraction in France. Consumer confidence also deteriorated more sharply than expected. French bonds remained under particular pressure, with the spread between French OATs and German Bunds widening to around 170 basis points, its highest level since the eurozone sovereign debt crisis. Looking ahead, further demonstrations are expected across the region this weekend, while investors await next week’s inflation data and the ECB’s policy meeting, where officials are widely expected to leave interest rates unchanged.