Market bets on the European Central Bank accelerating rate cuts, German government bond yield curve shows an inverted trend

The market expects the European Central Bank to accelerate rate cuts to address economic slowdown, with the German government bond yield curve returning to normal. The two-year bond yield is lower than the ten-year bond yield for the first time, and the spread has turned positive for the first time since November 2022. Signs of economic recession in the Eurozone are evident, with contraction in private sector activity. The German central bank has indicated that it may have entered a mild recession. The market expects the European Central Bank to cut rates by 43 basis points before the end of the year. French government bond yields are under pressure, with CDS spreads rising to 80 basis points, reflecting investors' concerns about France's fiscal challenges