German Bund Yields Ease as Bond Selloff Pauses

Germany’s 10-year Bund yield fell further below 3.45% after touching a 17-year high, as the sharp selloff in European government bonds paused and investors weighed demand for safe-haven assets against expectations for further ECB rate hikes through 2027. French bond yields remained near a more than two-decade high amid concerns over public finances, while political uncertainty ahead of the 2027 elections in France and Italy added to fiscal concerns. Investors also digested stronger-than-expected Eurozone inflation, which accelerated to 3.8% last month, its highest since September 2023 and well above the ECB’s 2% target, driven largely by higher fuel prices. ECB’s Isabel Schnabel said the coming months would be key to assessing the energy shock and determining how high rates need to rise, signaling a cautious approach. Still, markets price one further 25-basis-point hike by December, with a small chance of a second, and see the deposit rate reaching around 3.4% by late 2027.