German Bond Yields Show First Positive Curve in Nearly a Year

Yields on Germany's 10-year bonds surpassed those of 2-year bonds, disinverting the curve for the first time since November 2022. This change is notable amidst expectations of European Central Bank (ECB) rate cuts and signals concerns about economic downturns. French and Spanish bonds are also seeing significant movement.

Yields on Germany's 10-year bond rose above those on its two-year debt on Monday, marking the first disinversion of this part of the curve since November 2022. Soft business activity data fueled expectations for additional ECB rate cuts this year.

French government bonds are also under scrutiny, as France's 10-year yield approached Spanish yields for the first time in over a decade. The yield on the rate-sensitive German two-year bond fell by 9 basis points to 2.160%, while the 10-year yield dropped 5.5 bps to 2.166%.

The inverted curve, often a recession signal, has now disinverted, which Kenneth Broux of Societe Generale described as symbolic amidst weak PMI surveys. The European Central Bank may cut rates by 25 bps at its October meeting.

(With inputs from agencies.)