Germany’s 10-year bond yield is down 3.5 bps at 2.14%, and its two-year bond yield fell three bps to 2.08%
EUROZONE government bond yields dropped on Friday (Sep 27) after inflation data from France and Spain, with investors awaiting figures from the US, which could affect expectations for monetary policy paths on both sides of the Atlantic.
French consumer prices rose less than anticipated in September, aided by a decline in energy costs. Spain’s European Union-harmonised 12-month inflation fell to 1.7 per cent, lower than the 1.9 per cent expected by analysts polled by Reuters.
The German and euro area inflation figures are due next week. Markets will closely watch the Personal Consumption Expenditure (PCE) figures, the US Federal Reserve’s preferred inflation measure, later in the session.
Germany’s 10-year bond yield, the benchmark for the eurozone bloc, fell 3.5 basis points (bps) to 2.14 per cent.
Markets priced in more than a 70 per cent chance of a by the European Central Bank (ECB) of 25 bps in October, from around 20 per cent early this week and 60 per cent before data.
Germany’s two-year bond yield, which is sensitive to ECB rate expectations, was down three bps at 2.08 per cent. It hit 2.079 per cent on Thursday, its lowest level since December 2022.
The gap between French and German 10-year yields – a gauge of risk premium that investors demand to hold France’s government bonds – was last at 79 bps, from around 70 bps two weeks ago. It reached its widest since 2012 – beyond 85 bps – during France’s parliamentary elections.
French Budget Minister Laurent Saint-Martin warned the deficit is at risk of topping 6 per cent of economic output, far above the 5.1 per cent the previous government had estimated in the spring.
Italy’s 10-year yield fell four bps to 3.44 per cent, and the gap between Italian and German yields tightened to 128 bps. REUTERS
