Sovereign debt yields moved higher internationally as equity markets fluctuated and fresh inflation data altered monetary policy projections. Germany's policy-sensitive two-year yield rose to 3.13%, contributing to a 15.5-basis-point weekly jump alongside broader advances in Indian and U.S. yields. European Central Bank forward markets now anticipate the deposit rate will climb from the current 2.50% to 3.25% by late 2027. Meanwhile, French debt remains strained by national fiscal concerns and political uncertainty preceding next year's presidential elections.
Key points
Global sovereign bonds face continued downward price pressure due to lingering inflation…: Global sovereign bonds face continued downward price pressure due to lingering inflation and changing interest rate expectations.
European policy-sensitive short-term yields are climbing rapidly as traders brace for ext…: European policy-sensitive short-term yields are climbing rapidly as traders brace for extended central bank rate hikes.
Political uncertainty and fiscal trajectories continue to influence regional yield spread…: Political uncertainty and fiscal trajectories continue to influence regional yield spreads between major European sovereign debt issuers.
Sources checked by our analysis pipeline: 1
Germany's 10-year government bond yields, the euro area benchmark, climbed 4.5 basis points to 3.37% and were set for a 12-bp weekly rise. They hit 3.2075% last Friday, the lowest level since August 26.
Last week's rout in tech stocks had sent investors rushing into safe-haven bonds. Global stocks gave up early gains to trade lower on Friday.
Indian government bonds fell for a third consecutive session, driven by inflation and interest-rate outlook concerns. The benchmark yield increased to 7.3079%, reversing much of last week's gains. Retail inflation in India accelerated, surpassing the Reserve Bank of India's target range, which raises rate hike expectations. In the US, rising Treasury yields and inflation data led to altered rate hike projections.
German 2-year yields, more sensitive to expectations for policy rates, were up 0.5 bps at 3.13%, and on track for a 15.5-bp weekly rise.
ECB euro short-term rate (ESTR) forwards implied the deposit rate would climb to 3.25% by late 2027 from the current 2.50%, up from 3% priced in late last week. They also implied a rate of 2.74% by…
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