Eurozone government bond yields dipped slightly on Thursday ahead of the ECB meeting, while German benchmarks retreated from weekly highs.
Eurozone government bond yields fell slightly on Thursday as investors prepared for the European Central Bank meeting. German benchmarks retreated from nearly weekly highs. The yield on ten-year German bonds fell to 3.355 percent. The yield on two-year paper fell to 3.068 percent.
The ECB is expected to keep the deposit rate at 2.50 percent. The regulator has already raised rates in June and September to mitigate the effects of the energy price shock. Futures price in an 80 percent chance of a rate hike in December. Money markets forecast a total of about three more hikes, bringing the rate to 3.25 percent in 2027.
Inflation in the eurozone reached 3.8 percent in September — the highest since 2023. Oil prices are trading around 114 dollars per barrel. The sharp rise in yields, especially in France, has already led to a tightening of financial conditions. The yield on French ten-year bonds reached 5.14 percent last week — the highest since 2002. Moody’s kept France’s rating at Aa3 with a negative outlook, after which the yield fell below 5 percent. Now France pays more for borrowing than Italy: 4.95 percent versus 4.53 percent.
In the US, the Federal Reserve kept the rate in the 3.75–4 percent range. The yield on two-year Treasury bonds fell 3.8 basis points to 4.7 percent, while the ten-year yield rose 5 basis points to 5.042 percent. On Friday, eurozone GDP data for the third quarter and national inflation figures for October will be released.