European Bond Yields Post First Weekly Decline Since July

European government debt staged a broad recovery this week, with benchmark yields across the continent poised to post their first weekly decline in over a month. The German 10-year Bund yield held near 3.49% on Friday, marking its first weekly drop in six weeks.

The turnaround came after the Federal Reserve delivered a unanimous 25-basis-point rate increase to a target range of 3.75% to 4%, its first adjustment since mid-2023. Chair Kevin Warsh's assertive tone reassured investors that the central bank remains resolutely focused on anchoring long-term inflation expectations.

The Bank of England maintained its benchmark rate at 3.75% in a divided 6-3 vote, but warned that inflation could exceed 4% early next year. The central bank signaled a potential increase to 4.00% at its November gathering if energy shocks persist.