Eurozone government bond yields stabilize as US Treasury repo signals boost market sentiment

⑴ Eurozone government bond yields remained broadly steady on Thursday, tracking the tone of the US Treasury market, after the US Treasury Department announced an expansion of long-term Treasury repurchase operations to improve liquidity. Analysts believe this move aims to ease market tensions sparked by the rapid rise in long-term rates. ⑵ Despite global borrowing costs rising this week amid inflation concerns and the outlook for fiscal spending, upward pressure on long-term yields in the Eurozone has been relatively mild, reflecting a lighter debt burden and a more stable fiscal path compared to the US, whose total debt exceeds $40 trillion. ⑶ Germany's 10-year yield edged slightly lower, as did the 30-year yield, while US Treasuries partially gave back Wednesday’s declines during the London trading session, with the market still weighing the short-term impact of the repurchase announcement against underlying fundamental concerns. ⑷ Oil prices climbed further to near $93 per barrel, supporting inflation expectations and weighing on the bond market. Money markets continue to price in further rate hikes by the European Central Bank, with deposit rates expected to reach around 2.75% by March next year. ⑸ The Italy-Germany yield spread remained within its recent fluctuation range, with the yield curve continuing to steepen. Institutional strategists note that the supply of US Treasuries, the European Central Bank’s cautious stance, and persistently high energy prices continue to place structural constraints on the bond market.