German Yield Curve Flattens Amid ECB and PMI Anticipation
The German yield curve flattened as investors paused after weeks of steepening, anticipating euro zone PMI data and the ECB’s policy decision. Economists predict unchanged rates, potentially cutting in September. Meanwhile, the gap between 10- and 2-year German bond yields narrowed, reflecting market speculations.
On Monday, the German yield curve exhibited a flattening trend as market participants took a pause from pushing it steeper for four consecutive weeks. This period of reflection comes ahead of key economic data from the euro zone and an anticipated European Central Bank (ECB) policy decision later in the week.
Economists widely forecast that the ECB will maintain its current interest rates this Thursday, with a potential rate cut slated for September. Concerns over tariff uncertainties and a strong euro are expected to lead June's PMIs to stagnate, potentially supporting the prices of German government bonds.
In a broader context, Asian shares alongside the Japanese yen remained stable following elections that fared poorly for Japan's government. The German 2-year bond yields, which are more reactive to ECB policy rate expectations, dipped 2.5 basis points to 1.82%, while the 10-year yield fell 4.5 basis points to 2.65%.
(With inputs from agencies.)
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