German Bonds Drop With Just One More ECB Cut Expected

German short-dated bonds fell as traders pared bets on future interest-rate cuts by the European Central Bank, with President Christine Lagarde indicating that it may be approaching a pause.

Money markets briefly priced just 23 basis points of additional cuts by December — the least in two weeks — compared with 32 basis points before the ECB decision on Thursday. Short-dated bonds led a selloff, sending the two-year German yield as much as seven basis points higher to 1.87%. The euro rose 0.7% to $1.1495, its strongest level in six weeks.