FX.co ★ Germany 10-Year Yield Below 2.7%

Germany's 10-year Bund yield has slipped below 2.7% as traders continue to evaluate both monetary policy and the economic landscape. Expectations regarding a potential 25-basis-point rate reduction by the European Central Bank (ECB) this year have been tempered, with swap markets now reflecting less than a 50% likelihood of such a move. This adjustment in market sentiment comes in the wake of a second straight monthly increase in inflation in Spain, along with minor price hikes in some regions of Germany. In contrast, inflation levels remained unchanged in France and Italy. Eurozone GDP grew by a mere 0.1% in the second quarter, marking a significant deceleration from the 0.6% growth experienced in the first quarter—yet still exceeding the projections of no growth. The data highlights regional variations, with Germany and Italy reporting a 0.1% contraction in GDP, while modest growth was recorded in France and Spain. On the trade front, investor apprehensions linger over the recently signed US–EU trade agreement, which is widely perceived as disproportionately benefiting the United States.