FX.co ★ Germany’s 10-Year Bund Yield Falls on Weak Data

Germany's 10-year Bund yield has fallen below 2.8%, marking its lowest point since early December. This decline follows a series of weaker-than-anticipated economic indicators that have tempered expectations for a European Central Bank (ECB) rate increase by the end of the year. According to EUROSTAT, Eurozone consumer price inflation decreased to a four-month low of 2% in December, aligning with the ECB's midpoint target. Core inflation, which excludes volatile categories such as energy, food, alcohol, and tobacco, fell to 2.3%, slightly under the predicted 2.4%. In Germany, the annual inflation rate decelerated to 1.8% in December, missing projections and dropping below the ECB's 2% target for the first time since September 2024. German economic activity also appears to be losing momentum, as evidenced by a 0.6% decline in retail sales in November—the largest drop since May—contrary to expectations of a 0.2% increase. Consequently, money markets are now almost entirely dismissing the likelihood of an ECB rate hike by December 2026.