Market Insight: Decline Expected in German Government Bond Yields

Citi strategists believe that the rise in German government bond (Bund) yields, which have surpassed 2.25%, will decrease. Jamie Searle and Puja Sawant stated that yields above this level represent an attractive entry point for buying. The strategists remarked, "The reason we like buying Bunds above 2.25% is our belief that there is a close limit to how far the European Central Bank's terminal rate pricing can deviate." They also noted that issuance of Eurozone government bonds will decline from next week until the year-end, which will alleviate supply pressure that tends to drive yields up. Citi strategists project that 10-year Bund yields will drop to around 1.85% by early 2025. The 10-year Bund yield is trading with an increase of approximately 3 basis points at 2.309%.