Euro zone bonds find some respite, yields down from multi-year highs
TLT•Euro zone bond yields fell Tuesday, with France’s 10-year yield down 8 basis points to 4.77% and the French-German 10-year spread narrowing to 128 basis points from Friday’s 15-year high of 158. Markets priced an 85% chance of another ECB rate hike by year-end.
1. Yields ease
Euro zone bond yields fell Tuesday, and the spread between French and German 10-year yields narrowed to 128 basis points, down from a 15-year high of 158 on Friday. France’s 10-year yield fell 8 basis points from Monday’s close to 4.77%, while Germany’s fell 1 basis point to 3.48%.
2. Budget and rate outlook
France’s government unveiled a 2027 budget with €43 billion of new savings, while Marine Le Pen presented plans to reduce the public deficit to 3% by 2030. Investors priced an 85% chance of another ECB rate hike by year-end, while markets priced in fewer than two quarter-point rate rises by March, down from at least three before the bond selloff.
