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German Yield Curve Flattens as Oil Weighs on Inflation Outlook

  • Oil price plunge keeps deflationary worries alive in Europe
  • Euro-area government bonds rise for second day on Friday
Updated on

The yield difference between Germany’s 10- and 30-year government bonds shrank to the narrowest level since November as oil headed for its third weekly decline, helping add to deflationary pressure.

With the outlook for euro-area inflation dwindling, longer-dated German bunds are outperforming, reducing the extra yield they offer over shorter maturities, known as flattening the yield curve. Crude oil prices languishing around a seven-year low make it tougher for the European Central Bank to lift inflation to its target of just below 2 percent.