Bund Yields Fall to Two-Month Lows After ECB Decision

Germany’s 10-year Bund yield fell toward 3.3%, reaching its lowest level since late August, after the European Central Bank left interest rates unchanged. Sentiment was also influenced by reports of President Christine Lagarde’s planned early departure, as well as concerns over persistently high energy costs and France’s fiscal outlook. The ECB maintained a wait-and-see stance after raising rates twice since the Iran war disrupted energy markets. While policymakers warned that inflation could approach twice the 2% target, they have yet to see clear evidence that higher oil and gas prices are feeding into broader price pressures. The central bank provided little guidance on future rate decisions, as tighter financial conditions are expected to help contain inflation. Speaking at the post-meeting press conference, ECB President Christine Lagarde said the Governing Council had considered raising rates but unanimously decided to keep them unchanged.

Germany’s 10-year Bund yield edged down to 3.35%, approaching its lowest level since early September, as oil prices retreated and investors awaited the European Central Bank’s policy decision. Brent crude fell following reports that US Vice President JD Vance had sought to revive peace negotiations with Iran. The ECB is widely expected to keep rates unchanged amid slowing economic growth, with markets watching for clues on its future policy path. Expectations for further tightening have remained relatively stable since investors scaled back their bets in early October. Euro short-term rate forwards suggest the deposit rate could rise from 2.50% currently to 2.73% by December and 3.23% by late 2027. Although elevated energy prices are adding to inflationary pressures, policymakers are waiting to assess potential second-round effects before adjusting policy. In the US, the Federal Reserve held rates steady as expected ahead of next week’s US midterm elections.

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 on Wednesday. However, markets are pricing in potential rate hikes from both central banks in December.