German yields set for biggest weekly rise in two months
TLT•German 10-year yields rose 4.5 basis points to 3.37% and were set for a 12-bp weekly rise as traders increased bets on European Central Bank rate hikes. Two-year yields were on track for a 15.5-bp weekly rise.
1. Yields climb
German government bond yields were headed for their biggest weekly rise in two months as traders increased bets on European Central Bank rate hikes after hotter-than-expected US inflation data. A stock rebound also curbed safe-haven demand after last week’s technology stock rout sent investors into bonds.
2. Rate expectations and France
German two-year yields rose 0.5 basis points to 3.13%. Euro short-term rate forwards implied the ECB deposit rate would reach 3.25% by late 2027, up from 3% priced in late last week, and 2.74% by December; the current rate is 2.50%. The yield gap between French and German government bonds was set for an 8-bp weekly decline, though it rose 7 bps to 150 bps on Friday. French bonds remained vulnerable ahead of next year’s presidential elections, with investors concerned about the country’s fiscal trajectory.
