Germany: The Sick Man of Europe's Bond Yield Struggle

German government bond yields fell as business sentiment declined more than anticipated in December. Germany's business climate index dropped, indicating ongoing economic challenges. The Federal Finance Agency plans reduced bond issuances in 2025. Euro zone markets kept an eye on the U.S. Federal Reserve meeting for monetary policy cues.

On Tuesday, German government bond yields saw a decrease after domestic business morale fell more than expected in December. Germany's 10-year bond yield, the euro zone's benchmark, dropped by 3 basis points to 2.22%.

The Ifo Institute reported that Germany's business climate index declined to 84.7 in December from a slightly revised 85.6 in November. Analysts had anticipated a reading of 85.6, marking the second consecutive year of stagnation for Germany, according to ING analysts.

Meanwhile, the euro zone bond yields remained largely unchanged as attention turned to the U.S. Federal Reserve's forthcoming meeting, where a 25-basis-point cut is anticipated. In Italy, the 10-year yield decreased by 2 basis points, ending a three-day rise.

(With inputs from agencies.)