The german treasury bond bull market is becoming steeper, with the money market increasing bets on deeper interest rate cuts by the european central bank. Previously, jpmorgan economists brought forward the expected timing of a 50 basis points rate cut by the european central bank from next January to December.

Traders have raised expectations for easing by the european central bank, predicting a 20% chance of a 50 basis points rate cut next month, and projecting a total cut of 156 basis points by the end of next year, up from a previous estimate of 150 basis points.

The yield on german 2-year treasury notes fell by 5 basis points to 1.95%, marking a new low since 2022; the trend of the german 2s10s curve steepening has extended to 8 months, the longest since 1999.

The yield spread between france and german 10-year treasury notes narrowed by 1 basis point to 80 basis points, fully erasing the expansion to 90 basis points earlier this week.

The united kingdom treasury bonds are also in a bull market that is becoming steeper, lagging behind german treasury bonds and usa treasury bonds.

Traders continue to bet on a 1 basis point rate cut by the bank of england next month, but have raised bets on rate cuts next year by up to 3 basis points.

Markets

The yield on german treasury bonds fell by 4 basis points to 2.09%.

German futures rose by 38 points to 134.75.

Italy 10-year treasury notes yield fell by 6 basis points to 3.28%.

The yield spread between Italy and Germany narrowed by 3 basis points to 120 basis points.

France 10-year treasury notes yield fell by 5 basis points to 2.90%.

The 10-year united kingdom treasury notes yield fell by 3 basis points to 4.24%.