Eurozone bond yields edge lower as oil prices stabilise, ECB rate bets ease

Eurozone government bond yields edged lower on Thursday as oil prices stabilised following three consecutive sessions of declines, while investors assessed the possibility of reduced tensions in the US-Israeli war on Iran after Democrats' sweeping midterm election victory, as per a Reuters report.

Germany's 10-year government bond yield, the benchmark for the euro zone, fell 1.8 basis points to 3.2689%. Meanwhile, the two-year German bond yield, which is more sensitive to interest rate expectations, edged down to 3.0122%.

Brent crude futures were little changed at $94.87 a barrel, hovering near a two-month low after declining for three consecutive days.


According to Reuters, investors expect US President Donald Trump to face greater political constraints following the Democrats' midterm gains, potentially reducing the likelihood of a further escalation in the conflict with Iran. Trump acknowledged on Wednesday that the war had contributed to the Republican Party's electoral setback.

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The conflict has driven energy prices higher, fuelling inflationary pressures and prompting central banks worldwide to consider or implement interest rate increases to contain rising prices.

Eurozone inflation accelerated to 4% in October from 3.8% in September, according to data released on Wednesday, adding to concerns about persistent price pressures.

The European Central Bank (ECB) has raised interest rates twice so far this year. Money markets were pricing in a roughly 64% probability of another rate increase in December, slightly lower than the previous day, Reuters reported.

ECB policymakers have indicated that a December rate hike remains possible, although the decision will depend on incoming economic data and inflation expectations.

Meanwhile, investors were also monitoring developments in France, where large-scale protests and strikes were expected on Thursday, posing another challenge for President Emmanuel Macron.

Unrest last month weighed on French financial assets, including government bonds, which have already faced pressure from concerns over the country's fiscal position ahead of the 2027 presidential election.

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France's 10-year government bond yield declined around 4 basis points to 4.7804%.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)