Eurozone Bond Yields: A Cautious Rise
Eurozone government bond yields rose slightly as investors awaited key economic data from the euro area and the U.S. The 10-year Bund yields increased amid inflation concerns. Money markets see potential ECB rate cuts, while the yield gap reflects investor sentiment towards French debt.
Eurozone government bond yields continued their upward trend on Friday, driven by investor caution ahead of significant economic data releases from both the euro area and the United States.
The scheduled release of Purchasing Managers’ Index readings from France, Germany, and the broader euro area, alongside an impending U.S. inflation report, kept markets on edge. Germany's 10-year Bund yields increased by 0.5 bps to 2.58%, while U.S. sanctions on Russia ignited a surge in oil prices, further fueling inflation concerns. Subsequently, U.S. Treasury 10-year yields saw a marginal rise to 4.0% during early London trading.
In the money markets, there is currently a 60% probability of a 25-basis-point ECB rate cut by July, with expectations for the key rate to decrease to 1.84% by December 2026 from the present 2%. The yield differential between German 10-year Bunds and their French counterparts, indicating the risk premium for French debt, remains subject to fluctuations amid fiscal policy concerns and political stability in France.
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