Mixed German Borrowing Costs Amid Economic Concerns and Middle East Tensions

German borrowing costs showed mixed results amid economic growth concerns and Middle East tensions. Long-dated yields fell significantly, but Germany's 10-year bond yield rose slightly. Manufacturing activity in the euro zone declined, and the ECB might cut rates. France and Italy saw notable movements in bond yields and introduced public spending cuts.

German borrowing costs were mixed on Wednesday, following a significant fall in long-dated yields the previous day due to economic growth concerns.

Fears of a wider Middle East conflict pressured investors to seek safety in government bonds. Manufacturing activity across the euro zone declined at its fastest pace this year in September.

Germany's 10-year bond yield rose slightly by 0.5 basis points to 2.03%, reaching its lowest since January on Tuesday. Markets see a 90% chance of a European Central Bank rate cut in October.

Germany's two-year bond yield dropped by 0.5 basis points to 2.02%, its lowest since December 2022. The gap between French and German 10-year yields widened, reflecting increased risk premiums on French bonds. Prime Minister Michel Barnier announced steep cuts and tax hikes to address France's budget deficit.

Italy's 10-year yield increased by 0.5 basis points to 3.38%, with the gap between Italian and German yields widening significantly.

(With inputs from agencies.)