Eurozone Bond Yields and ECB Decisions: A Waiting Game

Eurozone bond yields showed little movement as investors anticipated the European Central Bank's upcoming policy announcement. Germany's 10-year yield dipped slightly. Market expectations include a 25 basis point rate cut, with more cuts anticipated by mid-2024. National political shifts, like in France, also influenced bond trends.

On Tuesday, eurozone bond yields remained largely unchanged as investors awaited the European Central Bank (ECB)'s policy announcement set for later in the week. Germany's 10-year yield, a key barometer for the eurozone, dipped under 1 basis point to 2.122%, following its lowest October benchmark of 2.03% last week.

The declining yields across major eurozone economies have led to speculation about potential ECB rate cuts due to a weakened growth outlook. The market has now fully priced in a 25 basis point rate cut during Thursday's policy meeting, with expectations of approximately 130 basis points of easing by summer next year, translating to five anticipated quarter-point reductions.

Meanwhile, France's bonds, underperforming against Germany's in 2024, appeared stable amid ongoing political shifts, as President Emmanuel Macron seeks a new government following a confidence vote against former Prime Minister Michel Barnier. Additionally, Italy's 10-year yield showed little movement, standing at 3.196%.

(With inputs from agencies.)