Euro zone bond yields pull back; France, Spain in focus
TLT•Euro zone bond yields fell on Monday, with 10-year yields at 3.4421% in Germany, 4.8279% in France and 4.0829% in Spain. Spain called a snap election for November 29.
1. Yields retreat across region
Euro zone bond yields fell on Monday, and an earlier gap between safer-haven German debt and bonds from more indebted countries narrowed. Germany’s 10-year yield was down 1.3 basis points at 3.4421%, France’s fell 3.9 basis points to 4.8279%, and Italy’s dropped 3.5 basis points to 4.5878%. The premium of French 10-year yields over German yields was around 137 basis points, after exceeding 158 basis points on Friday.
2. France and Spain in focus
French bonds have faced pressure over high debt and political risks ahead of the 2027 presidential election. Barclays said bond markets were right to be concerned about France, but that stress levels were far from those of the euro zone crisis in the early 2010s. Spain’s Prime Minister Pedro Sanchez called a snap election for November 29 after parliament rejected the government’s housing decrees; the country’s 10-year yield was down slightly at 4.0829%.
3. Rate expectations ease
Shorter-dated yields also declined. Money markets were pricing in a 20% chance of an ECB rate hike at its next meeting in October, after scaling back expectations last week.
