Federal Reserve's Rate Cut Spurs Surge in German Bund Yields

German Bund yields experienced their sharpest weekly rise since June, driven by the Federal Reserve's significant rate cut. Investor sentiment leaned towards riskier assets with expectations of further U.S. rate reductions. Meanwhile, caution persists over the European Central Bank's policy pace with key economic data anticipated.

German Bund yields were on track for their largest weekly rise since June after a substantial rate cut by the Federal Reserve stoked investor appetite for risky assets ahead of critical economic data next week.

Yields, which move inversely with prices, have seen a significant uptick as investors remain wary of the European Central Bank's easing cycle. Germany's 2-year Schatz yield—more sensitive to policy rate changes—rose 4 basis points to 2.25%. BofA European economist Ruben Segura-Cayuela noted, 'We doubt the Fed will make ECB, Norges Bank, or the Bank of England move faster.'

On Friday, German 10-year yields were up 3.5 basis points at 2.20%, poised to end the week 7 basis points higher. Wall Street's main indexes and European shares faced declines as investors paused after a rally influenced by the Fed's rate cut. Money markets have fully priced in a 25 basis points rate cut by the ECB in December, with a 25% chance of further easing by the end of the year.

(With inputs from agencies.)