German Bunds to help protect eurozone from yield curve steepening too much – Reuters

Global markets are experiencing a sell-off in government bonds amid concerns over mounting sovereign debt of major world economies, creating additional difficulties for issuers. The situation has affected the eurozone too.

However, as noted by Reuters, the selling in the bond markets of the eurozone is likely to slow down soon, facilitated by some improvement in the debt situation in Germany and the increasing interest in Bunds as safe havens.

One of the first signs of this is the narrowing gap between 2-year and 10-year German bond yields. Reuters points out that May ended with the first monthly decline by seven units to 74 basis points in this indicator in more than a year.

The yield curve in Germany is flattening for several reasons. For instance, the increase in bond supply has already been factored into prices. Tariff uncertainty implies a likely continuation of monetary policy easing by the European central bank. And, compared to other countries, Germany's debt dynamics make it the best place to keep cash in the face of global tensions, according to analysts quoted by the agency.