Germany’s 10-year Bund yield slipped to 2.86% as investors digested fresh European inflation data. Regional CPI figures showed a slowdown in price pressures, with inflation in North Rhine-Westphalia, the country’s most populous state, falling to a five-month low of 1.8% in December. Meanwhile, French consumer prices rose less than expected, adding to the broader signs of easing inflation in the eurozone. Money markets now assign virtually zero probability to an ECB rate hike by December 2026, and around a 24% chance by March 2027. Despite the modest decline, Bund yields remain near their March peaks, reflecting concerns over heavy government debt issuance, the effects of German fiscal stimulus, and ongoing geopolitical uncertainties. Private investors are expected to absorb a record €234 billion in net debt supply in 2026, after accounting for ECB operations.
