Euro Zone Bonds on the Rise: Anticipating Economic Shifts

Euro zone bond yields have surged to multi-week highs, driven by a series of global economic developments, signaling fewer central bank rate cuts. October marks the biggest monthly increase in yields since April, aligning with global trends. Market focus shifts to upcoming U.S. elections and payroll data.

Euro zone bond yields have reached multi-week highs, marking the biggest monthly increase in six months. Traders attribute this to various global developments suggesting a slower pace of central bank rate cuts. Germany's 10-year yield increased by 5 basis points to 2.425%, the highest since July, ending at 2.41%.

October has seen the euro zone benchmark yield rise by 27 bps, the most since April. This trend parallels the U.S., where the 10-year Treasury yield is up 47 bps. Germany's two-year yield climbed 4 bps to 2.32%, the highest since September.

Economic data presents mixed signals as the euro zone economy showed 0.4% growth in Q3, with inflation accelerating more than expected. Markets now predict fewer than four rate cuts by the Bank of England by December 2025, following a budget reassessment. The U.S. election adds further uncertainty, particularly regarding its impact on euro zone bonds and potential changes in ECB policy.

(With inputs from agencies.)