Germany's 10-year government bond yield decreased to 2.67%, marking its lowest point in roughly a month. This decline followed a surge earlier in the week, where yields had surpassed levels seen in March, driven by increasing fiscal and political uncertainties across Europe which pushed long-term yields upward. The recent downward movement was influenced by weak economic data from the United States, heightening expectations for Federal Reserve interest rate cuts both this month and for the remainder of the year, consequently alleviating global borrowing cost pressures.
Earlier in the week, yields had risen sharply, with the United Kingdom under scrutiny due to concerns over fiscal sustainability, complemented by political instability in France, which further negatively affected market sentiment. In Germany, the government's medium-term financial framework outlines plans for approximately €500 billion in net new borrowing through 2029, aimed at financing infrastructure and defense expenditures. Market focus now shifts to next week’s European Central Bank (ECB) policy meeting, where it is anticipated that interest rates will remain unchanged for the second consecutive decision amidst steady economic growth and inflation close to target levels. In the eurozone, the economy expanded by 0.1% in the second quarter, while inflation was recorded at 2.1% in August.
