German Bund Yields Reach Multi-Week Lows Amid ECB Rate Cut Speculations

German Bund yields have hit multi-week lows following European Central Bank (ECB) statements suggesting a potential rate cut in September. The ECB's recent policy meeting left future rate decisions uncertain, but economic signs support possible rate easing. Italian and French bond yields also showed varied movements, reflecting broader investor sentiment.

German Bund yields hit multi-week lows on Thursday as European Central Bank (ECB) remarks bolstered investor expectations for a rate cut in September. ECB President Christine Lagarde's comments left the decision for September's rate move 'wide open.'

The benchmark 10-year Bund yield dropped 1.5 basis points to 2.403%, reaching a fresh three-week low at 2.401%. Samuel Adams, a European economist at UBS Global Wealth Management, noted that the ECB could wait to gather more evidence of sustained disinflation before further lowering rates.

Market players are pricing in a 75% chance of a 25-basis-point cut in September, alongside a cumulative 70 bps of cuts for 2024. Massimiliano Maxia from Allianz Global Investors and Nicolas Forest from Candriam see further rate cuts likely, driven by easing inflation pressures. German two-year bond yields and Italian 10-year yields also reflected these speculations, with the latter dropping to near a three-month low. The gap between French and German yields remained stable as markets digested the ECB's cautious stance.

(With inputs from agencies.)