Germany’s 10-year Bund yield stood at 2.83% on Friday, but was on track for a weekly decline of around 7 bps, its steepest drop since March, after retreating from near nine-month highs. The pullback followed a run of mixed economic data, which tempered expectations for tighter monetary policy in Europe. German exports and retail sales unexpectedly fell in November, while factory orders and industrial production surprised to the upside. Inflation data, however, were more decisive: headline inflation slowed to 1.8% in December, falling below the ECB’s 2% target for the first time since September 2024. Across the broader euro area, consumer price inflation eased to a four-month low of 2.0%, further undermining expectations of a European Central Bank rate hike by year-end. Meanwhile, in the US, indicators pointing to a still resilient labor market reduced the likelihood of near-term interest rate cuts by the Federal Reserve.
