FX.co ★ Bund Yields Ease Ahead of ECB Rate Decision

Germany’s 10-year Bund yield slipped to 3.35%, nearing its lowest level since early September, as oil prices retreated and investors looked ahead to the European Central Bank’s upcoming policy decision. Brent crude declined after reports that US Vice President JD Vance had moved to revive peace talks with Iran.

The ECB is widely expected to leave interest rates on hold in the face of slowing economic growth, with markets focused on any hints about its future policy trajectory. Expectations for additional tightening have been broadly stable since investors pared back rate-hike bets in early October. Euro short-term rate forwards currently imply that the ECB’s deposit rate, now at 2.50%, could rise to around 2.73% by December and 3.23% by late 2027.

While higher energy costs continue to fuel inflationary pressures, ECB policymakers are waiting to evaluate potential second-round effects before making further adjustments. In the United States, the Federal Reserve kept interest rates unchanged, as anticipated, ahead of next week’s midterm elections.