Eurozone government bond yields remained near multi-year highs on Friday, with Germany’s benchmark 10-year yield heading for its largest weekly increase since March following the European Central Bank’s latest interest-rate decision.
The move put European bond yields on course for a fifth consecutive weekly increase as markets assessed energy-related inflation pressures and fiscal conditions across the region.
Germany’s 10-year Bund yield traded at 3.505%, close to levels last seen in 2011.
Longer-dated French government bonds also recorded higher yields, with the 30-year yield reaching its highest level since 2003. The source attributed the move to higher regional interest rates and concerns over France’s structural budget deficit.
Short-Term Yields Rise Following ECB Decision
The ECB raised its deposit facility rate by 25 basis points to 2.50% on Thursday.
The policy-sensitive German two-year yield recorded its largest one-day increase in two months following the decision and traded at 3.181% on Friday.
Brent crude moved above $109 per barrel amid Middle East supply restrictions and Houthi activity in the Red Sea. Money markets were pricing in a high probability of another ECB rate increase before the end of the year.
Market pricing also reflected expectations that European borrowing costs could remain at restrictive levels into late 2026 as policymakers monitor potential secondary effects from higher prices.
US Inflation Data in Focus
European fixed-income markets were also awaiting August US Consumer Price Index data from the Bureau of Labor Statistics.
The report follows Thursday’s US Producer Price Index data, which showed wholesale inflation rising to 5.4%.
A higher-than-expected CPI reading could increase market expectations for a Federal Reserve interest-rate increase at its September 15-16 meeting, potentially affecting government bond yields internationally.
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