Bonds: “Yields remain within a narrow trading range”

The political crisis in France had only a brief impact on European bond markets this week. In the US, the shutdown has meant a lack of current economic data. Investors are turning to corporate bonds, even those with higher coupons.

10 October 2025. FRANKFURT (Frankfurt Stock Exchange). While stocks, precious metals, and cryptocurrencies are currently booming, the bond markets remain relatively calm. At midday on Friday, the yield on 10-year US bonds stood at 4.11 percent, almost exactly the same level as the previous week. The situation is similar for 10-year German government bonds, which are currently yielding 2.68 percent. At the beginning of the week, the yield initially rose to around 2.73 percent due to the renewed government crisis in France. However, President Emmanuel Macron's announcement of the appointment of a new prime minister today quickly eased tensions on the markets. The yield spread between German and French bonds also returned to normal after a brief rise to 96 basis points, now standing at just 83 basis points.

Bearish positioning on the bond market
Elmar Völker from LBBW expects the yield on 10-year German government bonds to remain in a range between 2.60 and 2.80 percent for the time being. He currently considers an upward breakout to be particularly unlikely. He cites the ECB's “low propensity for further monetary easing,” “early indicators from the eurozone pointing to a moderately positive trend,” and the “bearish positioning of market players on the euro bond market” as reasons for this. This does not provide a favorable starting point for a sustained upturn in bond prices. “Rather, the tendency is likely to be to use phases of price recovery relatively quickly for profit-taking,” the bond specialist suspects.

Lack of data and political pressure
In the US, there is currently a lack of meaningful indicators regarding the Federal Reserve's future interest rate policy. “The timing of the release of important US economic data remains uncertain as long as the government shutdown continues,” explains Völker. The minutes of the latest Fed meeting published this week show how widely expectations regarding inflation and the neutral interest rate level diverge within the Council. The Fed cut key interest rates in September.

According to Deutsche Bank's calculations based on Fed Funds Futures, a cumulative total of around 110 basis points in further cuts is priced in by the end of 2026. For Tim Oechsner of Steubing AG, the development of the recently very fragile labor market will be decisive for the next interest rate moves. The central bank is facing persistent demands from the US government. “The Fed is currently under pressure from Trump to loosen monetary policy quickly,” explains Oechsner.