2025 Global Bond Market Landscape
- Introduction:
The 2025 global bond market witnessed high yields and volatility. Different monetary policies were implemented across different regions based on frequent updates in economic and labor data. Federal Open Market Committee (FOMC) was cautious regarding rate cuts and performed first rate cut in September 2025, while European Central Bank (ECB) started rate cuts at the beginning of 2025 due to decrease in inflation to target rate of 2%. As for Japan, rate hikes were implemented to combat the rise in inflation.
In the United States, both 5 and 10-year treasury yields decreased by 65 bps and 40 bps respectively to record 3.73% and 4.18%. In the Euro Zone, 10-year German Bund yield increased by 49 bps to record 2.855% at the end of 2025.
Going forward in 2026, geo-political tensions and currency appreciation/ depreciation will leave its impact on global bond markets. For United States, Federal Reserve policy, inflation, economic data, and supply and demand would affect its bond market. In Europe, increased geo-political risks due to the continued war between Ukraine and Russia and the increased spending of European countries on defense in addition to the absence of peace deal in the foreseeable future and appreciation of Euro against US dollar will add complexity to ECB’s policy rate outlook. In emerging markets, several factors might affect its bond market. The main ones are US interest rates, US Dollar strength, domestic fiscal stability, and political risks. Political and economic situation in 2026 will have the main impact on Lebanese Eurobonds in 2026.
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