Germany’s 10-year Bund yield turns positive for first time since 2019

Central banks expected to tighten policy to tame inflation

Germany’s 10-year bond yield, a benchmark for borrowing costs across the euro zone, swung above zero for the first time since 2019 as investors bet central banks will need to withdraw stimulus measures to slow inflation.

The yield on the 10-year Bund rose as high as 0.013 per cent on Wednesday, the highest level since May 2019, reflecting a drop in the price of the debt. In mid-December, the Bund yield had registered about minus 0.4 per cent.

The global rise in yields, led by the US, reflects investor angst that policymakers will need to act quickly to cool intense price growth that has taken hold across big economies. Higher than expected UK inflation figures on Wednesday added to the upward pressure on global bond yields.

Underscoring the recent shift in euro zone bond markets, Greece on Wednesday paid the highest borrowing cost on new 10-year debt since March 2019.

"You've got expectations of tightening everywhere, so the momentum is in favour of higher yields," said Andrea Iannelli, investment director at Fidelity International. "The euro zone is no exception to that."


The German government’s 10-year borrowing rate had been negative for nearly three years, signifying investors were prepared to pay for the privilege of lending their money to Berlin for periods of a decade or more. But the global debt sell-off at the start of 2022 has been enough to drag the euro area’s most important reference rate above zero.

A positive 10-year yield could make the debt more attractive to investors and will have knock-on effects for borrowing costs in other euro zone member states and companies.

"It has come to something when a basis point or two starts to look exciting," said James Athey, a portfolio manager at Aberdeen Standard Investments, referring to moves of a hundredth of a percentage point. "It underlines how bond investors have really been starved for many years." – Copyright The Financial Times Limited 2022