Euro zone bonds set for strong week as safe-haven appeal resurfaces
TLT•Euro zone government bonds were headed for their strongest weekly performance since late May as investors sought safety. German 10-year Bund yields fell 8.1 basis points to about 3.405%, while money markets priced a near-100% chance of an ECB rate hike in December.
1. Bonds gain as investors seek safety
Euro zone government bonds were headed for a strong week on Friday as concerns about AI-related companies’ ability to generate returns on heavy spending sent investors toward sovereign debt. Yields across G7 sovereign bonds were down an average of 7.7 basis points for the week, to 4.265%, their strongest weekly performance since late May.
2. Yields and spreads fall
German 10-year Bund yields fell 8.1 basis points this week to around 3.405%, while two-year yields were down 1 basis point at 3.068%. French 10-year yields were around 4.81%, down 7.4 basis points for the week. The premium over German 10-year yields stood near 139 basis points, below a 15-year high of nearly 160 basis points on October 2.
3. ECB speakers in focus
Money markets showed traders saw a near-100% chance of an ECB rate increase in December and priced at least one more hike by next April. ECB President Christine Lagarde and other officials were due to speak in Bangkok, with their remarks expected to inform near-term rate expectations. Separately, four people close to the World Economic Forum said it could appoint Lagarde as its next chair as soon as next month, which would mean she stepped down early as ECB chief.
