As investors unwind positions linked to "Trump trades," the German bond market is witnessing a bullish trend. The yield on Germany's 10-year government bonds has decreased by 8 basis points to 2.37%, marking the largest drop in five weeks. Chancellor Olaf Scholz has indicated readiness to discuss the timing of early elections.
Traders have increased expectations for the European Central Bank (ECB) to implement rate cuts, anticipating a decrease of 28 basis points by December and a total of 134 basis points by the end of next year. The UK's bond market is also showing a bullish inclination, although underperforming compared to Germany. For the Bank of England, traders have trimmed their rate cut bets by up to 4 basis points, with expectations of a 67 basis points cut by the end of 2025.
In the broader market, the German bond yield fell by 8 basis points to 2.37%, and German bond futures rose by 62 points to 132.04. Italy's 10-year government bond yield dropped by 7 basis points to 3.66%, while the yield spread between Italian and German bonds remained steady at 129 basis points. France's 10-year bond yield decreased by 9 basis points to 3.12%, and the UK's 10-year bond yield fell by 6 basis points to 4.43%.
