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[Eurozone bond yields fell, oil prices retreated and easing geopolitical expectations boosted the bond market] ⑴ Eurozone bond yields declined on Thursday, while oil prices remained near two-month lows, as investors bet on a reduced likelihood of a US-Israel war against Iran following a Democratic landslide victory in the midterm elections. ⑵ The yield on the German 10-year bond, the eurozone benchmark, fell 1.2 basis points to 3.2747%. ⑶ Brent crude oil fell nearly 20% this week, last trading at $96.81 a barrel, rising on the day but still near a two-month low. ⑷ Investors believe that the likelihood of US President Trump escalating the war against Iran has decreased, given the pressure from a Democratic-controlled Congress and high energy prices related to the Middle East conflict. Trump also acknowledged on Wednesday that the conflict was responsible for the Republicans' midterm election losses. ⑸ Reduced post-election political uncertainty also supported risk assets, with French and Italian bonds leading the gains. (6) The yield on French 10-year government bonds touched a near one-month low earlier in the session, and was last down 7.3 basis points to 4.7485%, narrowing the Franco-German spread to 146 basis points. This was after reaching 177.7 basis points at the end of October, the highest since the 2011 Eurozone debt crisis. (7) French bonds were also supported by strong bond auctions, unaffected by protests and strikes. Last month's turmoil had put pressure on French assets, and concerns about its fiscal situation ahead of the 2027 presidential election were already weighing on the market. Some institutional strategists said that pre-election uncertainty could widen the spread again. (8) The yield on Italian 10-year government bonds was last down 2.8 basis points to 4.3358%. (9) Short-term yields, which are more sensitive to interest rate expectations, were largely stable, while the yield on German 2-year government bonds was little changed at 3.0285%. (10) Data released on Wednesday showed that eurozone inflation accelerated to 4% in October from 3.8% in September. The European Central Bank (ECB) has already raised interest rates twice this year to curb inflation, and the money market is currently pricing in a 63% probability of another rate hike in December, slightly lower than the previous day. (11) ECB policymakers stated that a December rate hike is on the table, but the decision will depend on subsequent economic and inflation data. Some institutional strategists said that falling oil prices and improved market sentiment after the US midterm elections have eased pressure on the ECB, as the market believes it is more likely to avoid a meaningful second round of inflation. (12) Elsewhere, the Bank of England raised interest rates for the first time this year as expected.