Germany’s 10-year Bund yield slipped to 3.45%, hovering near its lowest level since September 9, as investors awaited US inflation data for clues on the Federal Reserve’s policy outlook. The September CPI report, the final inflation reading before the Fed’s October meeting, is expected to show the annual rate rising to 3.6%.
Bond markets have shown tentative signs of stabilizing in recent days, with volatility easing after a global sell-off in late September and early October. The earlier surge in yields was driven by concerns over soaring energy prices, stubborn inflation and higher borrowing costs, while fiscal strains intensified pressure on more heavily indebted countries.
At the same time, ECB President Christine Lagarde noted that elevated, energy-driven inflation has not yet become broad-based across the euro-area economy, reinforcing a wait-and-see stance. Even so, repeated upside inflation surprises and the ongoing US–Iran conflict have led markets to price in another ECB rate hike in December, following two increases earlier this year.
