Eurozone government bond yields moved lower on Wednesday as oil and natural gas prices declined amid developments surrounding U.S.-Iran diplomacy.
Germany’s 10-year Bund yield, a benchmark for the euro area, fell to 3.448%, extending its decline from multi-month highs reached earlier in September.
At the shorter end of the yield curve, Germany’s two-year Schatz yield declined to 3.19%, as markets reassessed expectations for further interest-rate increases from the European Central Bank.
European bond yields followed a similar move in U.S. Treasuries, where yields declined across maturities following comments from U.S. President Donald Trump indicating openness to talks with Iranian representatives at the United Nations General Assembly.
Oil and Natural Gas Prices Decline
The move in government bonds coincided with declines in crude oil and European natural gas prices.
A senior Iranian official told Reuters that the Strait of Hormuz could reopen to international maritime traffic within seven days if Washington lifted its naval blockade of Iranian ports and reduced military pressure.
Brent crude subsequently fell below $100 a barrel, while European wholesale natural gas futures also moved lower.
Lower energy prices prompted market participants to reduce some expectations for additional European Central Bank interest-rate increases after the central bank raised rates two weeks earlier.
French Government Bonds Underperform German Bunds
French government bonds underperformed their German counterparts amid continued attention on France’s fiscal position and domestic political situation.
Official projections put France’s debt-to-GDP ratio at 119.3% in 2026, rising to 121.7% in 2027.
France’s 10-year OAT yield has increased by more than 90 basis points during 2026, contributing to a wider spread between French and German government bond yields.
The widening spread indicates that investors are demanding a higher yield to hold French government debt relative to German Bunds.
Eurozone PMI Data in Focus
Market attention is also turning to preliminary Eurozone Purchasing Managers’ Index data for September.
The figures will provide an indication of private sector activity across the currency bloc following recent increases in energy costs and changes in monetary policy.
Investors will also be monitoring the individual readings from major Eurozone economies, including Germany and France.
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