Bond Yields Dip Amid U.S. Treasury Secretary Designation

Bond yields in the Euro area declined as U.S. yields fell after Scott Bessent was appointed U.S. Treasury secretary, raising hopes to manage U.S. debt. European Central Bank's potential rate cuts impacted German yields, while political tensions affected French bonds.

Euro area government bond yields fell on Monday following a decline in U.S. yields as fund manager Scott Bessent was appointed as U.S. Treasury secretary by President-elect Donald Trump. This move is expected to control U.S. debt.

The appointment of Bessent led to a relief rally in U.S. Treasuries, coming after markets expressed concerns over a potential inflation rebound and an increase in the federal budget deficit due to Trump's economic policies, including tax cuts and import tariffs. Concurrently, weak purchasing manager surveys in the euro area led to German 2-year yields reaching their lowest levels in nearly two years, amid expectations for more European Central Bank rate cuts.

Germany's 2-year government bond yields, which are reactive to ECB rate expectations, decreased to 1.99%. The yield gap between Italian BTPs and German Bunds remained steady at 125 bps. Meanwhile, political unrest in France, spearheaded by far-right leader Marine Le Pen, slightly widened the spread between French and German yields.

(With inputs from agencies.)