Bond Yields In Europe and UK Approach Multi-Year Highs, Pound and Euro Under Pressure

Bridgette Randall
10 Jan, 2025
London

Stock market indexes in Europe struggled to advance, and bond yields remained elevated amid growing fiscal imbalances in France, the UK, and Germany. 

Benchmark indexes in Frankfurt, Paris, and Milan gained, but they fell in London as investors debated future rate path outlooks amid higher-for-longer interest rates in the U.S. 

The yield on 10-year UK gilts advanced to a fifteen-year high, and 30-year gilts rose to a 30-year high amid a weak economic growth outlook and an unabated rise in government debt. 

Bond yields in France also approached a 15-year high as the minority government struggles to finalize its fiscal budget, and the government debt is expected to increase to a new high above 114% of its gross domestic product. 

Moreover, bond yields in Germany, Spain, and Italy also approached 15-year highs as leading economies of the currency union struggle to contain ever-rising government debt amid high costs of imported energy and ongoing Ukraine war expenditure. 

On the economic front, French industrial output increased 0.2% in November from October, when it was down 0.3%, according to the latest data released by statistical office INSEE. 

French household consumption increased 0.3% in November from October when it was revised to fall 0.3%, a separate report by the statistical agency showed. 

In other economic news, Norway's consumer price inflation slowed in December to 2.2% from 2.4% in November, Statistics Norway reported Friday. 

The main downward pressure came from slower rates of inflation for food, non-alcoholic beverages, and housing and utilities. 

The overall inflation rate dropped to the lowest level since December 2020, and the rate for the full year 2024 dropped to a four-year low of 3.1%. 

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 20,362.33; the CAC-40 index rose by 0.2% to 7,506.39; and the FTSE 100 index inched lower by 0.2% to 8,303.66. 

For the week, the DAX increased 2.2%, the CAC-40 index advanced 2.7%, and the FTSE 100 index gained 0.8%. 

The yield on 10-year German bonds edged higher to 2.55%, French bonds rose to 3.40%, the UK gilts increased to 4.84%, and Italian bonds rose to 3.73%.

The euro is expected to trade below parity with the U.S. dollar as the European Central Bank implements its four rate cuts this year, and the British pound is likely to sink to $1.05 amid worsening economic outlook. 

The euro edged lower to $1.03; the British pound inched lower to $1.224; and the U.S. dollar strengthened to 91.39 Swiss cents.

Brent crude decreased $2.05 to $78.97 a barrel, and the Dutch TTF natural gas fell by €1.63 to €43.57 per MWh. 

 

Europe Stock Movers

Ubisoft declined 7.5% to €11.66 after the French computer game company lowered guidance for fiscal 2025 and announced another delay in releasing the next version of its blockbuster franchise, Assassin's Creed. 

Nordex SE increased 1.7% to €11.38 after the German wind turbine maker reported four new orders from customers in Spain totaling 259 MW. 

Koninklijke Philips NV advanced 2.2% to €25.45 after the company announced a management shake-up and appointed new leaders for its international regions and precision diagnosis division.