Eurozone Bond Yields Poised for Weekly Decline Amid Weakened Rate Hike Expectations

The Eurozone benchmark bond yields are poised for their first weekly decline since early August, as investors reassess expectations for further European Central Bank interest-rate increases.

Following a sharp rise in global borrowing costs, money markets have scaled back predictions of additional rate hikes by the ECB. The current probability of a second rate hike before the end of the year stands at around 50%, with the deposit rate expected to reach 2.86% by December, compared to its current level of 2.50%.

Germany's 10-year government bond yield rose 0.5 basis points to 3.49%, but remains on track for a weekly decline of around 2 basis points. The spread between French and German 10-year yields stood at 96.50 basis points, having widened to 98.15 basis points on Tuesday.

ECB Vice President Boris Vujcic cautioned against assessing monetary policy solely through the lens of energy prices, emphasizing that policymakers would consider a broader range of economic indicators.