Germany sells EUR 3.832 bln of 10 year 2.6% government bonds

Germany sells EUR 3.832 bln of 10 year 2.6% government bonds

Germany sold EUR 3.832 billion of 10-year government bonds with a yield of 2.6% on July 2, 2025. The auction was well-subscribed, with investors showing strong demand for the bonds. The yield on the 10-year bunds was slightly higher than the previous issuance, reflecting market expectations of modest interest rate hikes by the European Central Bank (ECB) [1].

The issuance comes amid a backdrop of mixed government bond yields in developed markets. While U.S. 10-year yields fell by 17 basis points (bps) to 4.23% in June, German Bund yields rose by 10 bps to 2.6% [1]. The ECB's hawkish signals and increased fiscal spending in Germany contributed to the rise in bund yields.

The strong demand for German government bonds underscores the continued confidence in the eurozone's fiscal health. Despite geopolitical tensions, investors remain bullish on the eurozone economy. Sovereign spreads in the eurozone are at their tightest levels since before the euro sovereign crisis [1].

In the broader fixed-income market, emerging market debt posted strong returns in June, buoyed by a weaker dollar, positive fund flows, and tightening spreads across both sovereign and corporate credit. Local rates outperformed global peers, and geopolitical risks had limited lasting impact on market sentiment [1].

Looking ahead, markets are pricing in two to three Fed rate cuts by year-end, though inflationary risks from tariffs and fiscal expansion remain a key uncertainty. The market is forecasting five cuts by the end of next year, with expectations for one more cut for the ECB and the Bank of Canada, and about one and a bit for the Riksbank [1].

References:

[1] https://www.eatonvance.com/insights/global-fixed-income-bulletin/wating-for-godot-fixed-income-edition.html