Published by Global Banking & Finance Review®
Posted on December 10, 2025
3 min readLast updated: January 20, 2026
Add as preferred source on GoogleGermany's 10-year yield hits a nine-month high as ECB rate cuts are priced out, with focus on the Federal Reserve meeting.
By Joice Alves and Alun John
LONDON, Dec 10 (Reuters) - Germany's 10-year borrowing costs hit fresh multi-month highs on Wednesday as traders price out any chance of further European Central Bank rate cuts, while looking ahead to an important Federal Reserve meeting later in the day.
Germany's 10-year yield rose two basis points to 2.87%, after briefly hitting its highest level since March in the aftermath of Germany's move to substantially increase borrowing and government spending.
French 10-year yields rose 3.2 bps to 3.59%, also around their highest since March.
The euro zone benchmark has been largely range-bound in recent months but was jolted on Monday by remarks from ECB board member Isabel Schnabel who said the next move in euro interest rates is more likely to be up and warned that leaving rates unchanged for too long could bring a passive easing of monetary policy.
Other members of the ECB's governing council, including Bank of France head Francois Villeroy de Galhau, said on Wednesday they expected the ECB to keep rates at their current level.
"Rates markets are re-pricing as central bankers and investors come to terms with the idea that the policy rate cutting cycle... is nearing its end," said Laurence Mutkin, Head EMEA Rates Strategy at BMO.
Markets now see no prospect of an ECB cut next year, having previously seen a small chance.
Traders have also been paring back bets on further easing by other global central banks, but the most important, the Federal Reserve, is something of an outlier.
Markets are pricing in a 25-basis-point rate cut from the Fed later on Wednesday, and see two further such moves as likely during 2026.
While it would come as a massive surprise to markets if the Fed does not cut on Wednesday, the language around any decision and accompanying economic projections will give investors some guidance around the Fed's potential next moves.
The meeting will also set expectations for President Donald Trump's upcoming nominee to lead the central bank as Jerome Powell's term as chair ends in May.
Helping the mood across Europe, French lawmakers narrowly approved the 2026 social security budget on Tuesday, handing Prime Minister Sebastien Lecornu a crucial victory but at enormous political and financial cost that could still threaten his fragile government.
(Reporting by Joice Alves and Alun JohnEditing by Alexandra Hudson and Gareth Jones)
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It oversees monetary policy and aims to maintain financial stability.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and economic conditions.
Debt instruments are financial assets that represent a loan made by an investor to a borrower. They include bonds, notes, and mortgages, and are used to raise capital.
The European Central Bank (ECB) is the central bank for the eurozone, responsible for monetary policy, maintaining price stability, and overseeing the euro currency.
Market volatility refers to the degree of variation in trading prices over time. High volatility indicates significant price fluctuations, while low volatility suggests stable prices.
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