Euro zone bond selloff pauses, Germany 10-year yield falls 4 bps
Germany's 10-year yield fell 4 basis points to 3.6% after hitting a 17-year high on Monday. France's 10-year yield stayed near an 18-year high and the spread over Germany widened to 117 bps.
(Updates prices) Germany's 10-year yield falls 4 bps, hit 17-year high on Monday Money markets price almost four more quarter-point ECB hikes Oil and gas prices remain main driver By Samuel Indyk LONDON, Sept 29 (Reuters) — A selloff in euro zone bonds paused on Tuesday, although yields remain near their highest in years as robust growth and elevated energy costs are expected to push up global interest rates. 6%, as the price rose. 6526%. Oil and gas prices remain the biggest drivers of euro zone bonds by generating concerns that energy-driven inflation could force the European Central Bank to raise rates further.
Oil prices fell by around 1% on Tuesday, a day after US and Iranian officials spoke separately with mediators in a renewed effort to end seven months of war. Ecb To Take Measured Approach On Monday, ECB President Christine Lagarde said the central bank views a measured response as appropriate to keep inflation in check. She also flagged that bond market developments, namely rising long-term yields, could slow growth. "It's interesting to see if this is something that is starting to bother the ECB a bit," said Jussi Hiljanen, rates strategist at SEB.
" Money market traders are pricing in almost four more quarter-point rate hikes, on top of the two moves made over the summer. Futures imply about a 45% chance of a rate hike next month. When interest rates rise, newly issued bonds will offer higher returns, making existing bonds with lower coupons less attractive. 272%, after hitting a 3-year high the day before.
Fiscal Worries Investor concerns about debt sustainability have also helped drive bond prices lower, particularly in countries where the fiscal backdrop looks strained, such as France. France has gained particular focus as it heads towards a presidential election in 2027, with a substantial primary deficit and fragmented parliament. Its bonds have been among the worst-performing so far in September. French 10-year yields have risen nearly 65 bps this month, set for their largest monthly rise since December 2022 and well above the G7 average of 38 bps.
France's 10-year bond yield was little changed on Tuesday and still close to the previous day's 18-year high. 75 bps to 117 bps, its widest since 2012. "The situation in France is very challenging into 2027," said SEB's Hiljanen. com)