European government bonds advanced across the board as oil prices retreated, prompting traders to scale back their expectations for interest rate hikes in 2026. The upward momentum moderated slightly toward the end of the trading session.
The yield on Germany’s 10-year government bond fell by 3 basis points to 2.95%, after earlier posting its largest intraday decline since October. Italian bond yields led the declines, with the spread between Italian and German bonds narrowing by 3 basis points.
Swap market data indicated that traders now anticipate the European Central Bank will raise interest rates by 42 basis points in 2026, a reduction of 6 basis points from earlier in the day.
UK government bonds also advanced, with longer-dated securities leading the gains. The 30-year yield dropped 6 basis points to 5.44%, while traders trimmed their expectations for Bank of England rate hikes in 2026 by 10 basis points to 17 basis points.
Market data: - Germany’s 10-year bond yield fell 3 basis points to 2.95%; - German bond futures rose 32.00 points to 126.22%; - Italy’s 10-year bond yield dropped 6 basis points to 3.73%; - The Italy-Germany yield spread narrowed by 3 basis points to 78 basis points; - France’s 10-year bond yield declined 7 basis points to 3.61%; - The UK’s 10-year bond yield decreased 5 basis points to 4.77%.
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