Yield on 10-year German bonds dropped to 3.29% and reached a low for almost three months due to the sell-off in technology company shares and investor caution ahead of the US elections.
Eurozone government bond yields remained stable on Tuesday. Benchmark indicators fell to the lowest level since August.
The yield on 10-year German bonds was 3.29%. The indicator fell below the previous autumn support level and reached a low for almost three months. On the near end of the curve, the yield on the most rate-sensitive papers was 3.03%.
The reason for market caution was a warning about rising memory chip prices, which will put pressure on profit margins in the holiday quarter. The situation was exacerbated by investors' defensive positioning ahead of the US midterm elections.
Large American technology companies are increasingly attracting European investors to finance artificial intelligence infrastructure. One of the companies announced the second euro bond placement this year after an issue of 9 billion euros in May.
This deal coincided with plans by another tech giant to raise 20 billion dollars through bonds and shares for building data centers. Asset managers expect other hyperscalers to follow suit and accelerate borrowing in euros, pounds and Swiss francs.
Europe's deep capital pools and attractive cross-currency swaps have become an alternative to the US market. However, a large volume of placements could crowd out European issuers and increase borrowing costs.
The problem is particularly acute in France. The yield on benchmark papers is holding around 4.97% after Fitch revised the sovereign outlook to negative last week.