Eurozone Bonds: Modest Weekly Decline Amid Economic Speculations

Eurozone bond yields experienced a slight increase as traders maintained expectations on the ECB's rate path following recent economic data and accounts. Germany's 10-year bund yields remained a focal point, with inflation and employment data playing crucial roles. Meanwhile, the German budget for 2026 highlights new debt for economic recovery.

Eurozone benchmark bond yields saw a slight rise on Friday but continued on track for their second consecutive week of modest decline. This trend follows trader expectations for the European Central Bank's rate path, influenced by recent economic data and the ECB's account details. German borrowing costs, while rising, lagged behind those of U.S. Treasuries, causing the gap between 10-year Bunds and Treasuries to narrow.

Evelyne Gomez-Liechti, a strategist at Mizuho International, noted mixed market signals from the U.S., where weak data and month-end positions were noteworthy. On the German front, attention is shifting towards the future fiscal outlook, with investors analyzing whether market conditions are fully accounted for or not.

Germany's 10-year yields, serving as the euro area's benchmark, rose slightly to 2.7%, despite a predicted weekly drop. Factors like heightened inflation, a rising unemployment rate, and a decrease in retail sales drive the yields. Meanwhile, Germany's budget for 2026 has been passed, highlighting plans for over 180 billion euros in new debt aimed at revitalizing the sluggish economy.

(With inputs from agencies.)