Eurozone bond yields are rising faster than German and French inflation rates

Euro zone government bond yields rose on Tuesday after falling the day before as investors awaited inflation data from Germany and France later in the session. The German ten-year yield, the benchmark of the eurozone, rose by 2.5 basis points to 2.90%.

They rose to 2.917% before Christmas, just a few basis points off the highs of March, when Germany struck a political deal to boost infrastructure and defense spending.
Oil prices fell on Tuesday, further easing inflation concerns as the market weighed the prospect of higher Venezuelan crude production ‌after the ‍US crisis. arrest of President Nicolas Maduro.

Money markets estimate a probability of around 10% of a European Central Bank tightening measure in December 2026 and around 30% in March 2027. The deposit rate is currently 2%.

The German 30-year yield rose by 1.5 basis points to 3.53%. On December 22, they reached 3.556%, the highest level since July 2011, as long-term debt prices came under pressure on expectations for increased bond supply.

The yield on the German 2-year Schatz, which was more sensitive to expectations regarding the policy rate, rose by one basis point to 2.14%. Italian 10-year government bond yields fell 1.5 bp to 3.55%, with the spread against Bunds at 64, after reaching 60 bp last week, the lowest level since September 2008.