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2026-02-13 19:31:22
[German Bond Yields Hit Two-Month Low as Munich Security Conference Takes Center Stage] ⑴ On Friday, the yield on benchmark German bonds in the Eurozone remained at a more than two-month low, with the weekly decline expected to be the largest since March. While awaiting US inflation data, the market continues to focus on the upcoming Munich Security Conference, seeking signals from the EU regarding defense spending and the economic outlook. ⑵ German bond movements are more closely following US Treasury yields than domestic data. Citigroup's European interest rate strategist, Jamie Searle, pointed out that looking ahead, European fiscal policy, defense spending, and bond issuance will remain key themes throughout 2026. ⑶ Money market expectations for ECB action this year have shifted, with the current pricing in a 30% probability of a December rate cut, up from about 20% at the beginning of the week. The yield on 10-year German government bonds fell 1 basis point to 2.77%, hitting a new low since December 4 at 2.76% during the session, and down 8 basis points for the week. (4) The yield on the 10-year U.S. Treasury note rose slightly by 1 basis point to 4.12% in early London trading, after falling in the previous session due to employment data. Market focus is entirely on the U.S. January inflation data to be released later. (5) The yield on the 2-year German bond fell 0.5 basis points to 2.02%. The yield on the 10-year Italian bond was unchanged at 3.39%, with the spread between the Italian and German bonds at approximately 60 basis points, widening from the lowest level since August 2008 at 53.5 basis points in mid-January. Analysts pointed out that progress in European financial integration is a key factor in the further narrowing of yield spreads in the Eurozone in the future.
