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2025-10-28 19:09:22
Eurozone bond yields fell for two consecutive days, leading to a cautious market ahead of the central bank's interest rate meeting. ⑴ Eurozone government bond yields fell slightly for two consecutive trading days, with the German 10-year bond yield falling slightly by 0.5 basis points to 2.61%, reversing some of Friday's gains. ⑵ The market fully priced in a 25 basis point rate cut by the Federal Reserve on Wednesday, but expectations for subsequent ECB action were conservative—the money market only priced in a 54% probability of a rate cut before September 2026. ⑶ Pacific Investment Management Company believes the ECB's rate-cutting cycle has ended, and the current 2% deposit rate is likely considered by most members to be the midpoint of a neutral level. ⑷ Continuing fiscal concerns in France have left the 10-year Franco-German yield spread at 80.50 basis points. Institutions believe that political compromise could lead to a further deterioration in the fiscal situation.
