Germany's 10-year bond yield DE10YT=RR -- the euro area's benchmark -- was down 0.5 basis points at 3.26%, after closing little changed on Wednesday, while the 30-year yield DE30YT=RR fell 0.5 bps to 3.76%.
U.S. Treasuries partially reversed Wednesday's move in London trade. The benchmark 10-year yield US10YT=RR was up 2 bps at 4.67% after falling 5.5 bps the day before. The 30-year US30YT=RR rose 3 bps after falling 9 bps.
Market bets on a European Central Bank rate hike remain around their highest levels since the start of the Middle East conflict and when oil prices were at around $120. Money markets fully priced a depo rate at 2.75% by March next year EURESTECBM5X6=ICAP, up from the current level of 2.25%. They also price an around 25% chance of a depo rate at 3% by March.
German two-year bond yields DE2YT=RR, which are more sensitive to interest rate expectations, fell 0.5 basis points to 2.85%.
"Our bias remains for flatter curves tactically, helped by the U.S. Treasury signal and stretched long-end positioning," Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho, said.
"That said, structurally, German fiscal supply, a cautious ECB and higher energy prices still argue against declaring the steepening finished," she added, after earlier urging investors to "be cautious about chasing yesterday’s tightening before supply clears".
Yield curves steepened this week as long-term yields climbed faster than their shorter-dated counterparts.
The yield gap between Italian government bonds and bunds DE10IT10=RR was at 79 bps. It was at 63 bps in February before the attack on Iran and hit 103.62 in late March, the widest since June 2025.
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