Eurozone Bond Yields Set for Weekly Decline Amid Easing Rate Hike Expectations

The Eurozone bond yields are expected to decline for the first time since early August due to easing expectations of further interest rate hikes by the European Central Bank. Investors have scaled back their bets on a second rate hike before the end of the year, with money markets pricing the ECB's deposit rate at around 2.86% by December.

This move comes after a week of major central-bank decisions, including the U.S. Federal Reserve raising interest rates and adopting a more hawkish stance. The Bank of England kept rates unchanged but warned that elevated energy prices could intensify inflation pressures.

The spread between German and French 10-year yields stood at 96.50 basis points, with France's 10-year government bond yield rising to 4.45% on Friday. Italy's 10-year government bond yield was little changed at 4.35%, leaving the spread over German Bunds at around 86 basis points.

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