Where will German government bond yields go?

On December 14, European financial markets witnessed a sharp increase in German government bond yields (Bund), marking the strongest increase in the past 8 months.

European financial markets witnessed a sharp increase in German government bond yields. (Source: Reuters)

European financial markets saw a sharp rise in German government bond yields after traders adjusted expectations that the European Central Bank (ECB) would cut interest rates more quickly.

According to market information, the yield on 10-year German government bonds increased by 6 basis points to 2.248% on December 13, the highest level since November 25. This yield has increased by a total of 13.5 basis points over the past week, reflecting the change in investors' expectations.

Reviews from experts

Economist Mariano Cena at Barclays bank said that the ECB's policy rate guidance is still lacking in commitment, which makes investors feel uncertain about the future of interest rate policy.

Some of ECB President Christine Lagarde's comments could be interpreted as "less dovish than the market expected," said Simon Dangoor, head of fixed income macro strategy at Goldman Sachs Asset Management. This has caused the bond market to adjust its expectations.

Massimiliano Maxia, fixed income specialist at Allianz Global Investors, said that many investors took profits after the ECB meeting, leading to a rise in bond yields.

Highlights from the ECB meeting

The ECB cut interest rates for the fourth time this year on December 12. After the meeting, investors are now focusing on an upcoming speech by President Lagarde as well as the results of the purchasing managers survey due on December 16.

Money markets are now pricing in the ECB's interest rate path, with the deposit rate expected to hit 1.93% by July 2025, up from 1.85% forecast before the December 12 meeting.

The US Federal Reserve's interest rate outlook is also influencing the Eurozone bond market. Experts believe the Fed may cut interest rates next week; however, the number of cuts next year may be fewer than previously thought. This is because President-elect Donald Trump's policies are expected to boost growth and inflation in the US.

The recent rise in German government bond yields reflects the adjustment in market expectations regarding the ECB's interest rate policy, as well as the impact of the US economic developments. Investors will continue to closely monitor the ECB's statements and key economic indicators in the coming period. This development will not only affect the bond market but also have a significant impact on the Eurozone economy in the current volatile context.

Source: https://baoquocte.vn/loi-suat-trai-phieu-chinh-phu-duc-se-di-ve-dau-297399.html