Eurozone sovereign yield curve
German Bund (EUR) — full term structure, 2s10s and 3m10y spreads, NY Fed recession probability, Nelson-Siegel-Svensson fit.
Data as of June 30, 2026Term structure
| Tenor | 3M | 6M | 1Y | 2Y | 3Y | 5Y | 7Y | 10Y | 20Y | 30Y |
|---|---|---|---|---|---|---|---|---|---|---|
| Yield (%) | 2.27 | 2.35 | 2.43 | 2.48 | 2.49 | 2.58 | 2.72 | 2.92 | 3.34 | 3.43 |
Term structure with NSS fit
Observed yields (markers) overlaid with the Nelson-Siegel-Svensson smoothed fit (orange).
Dashed line = current policy rate (2.25%).2s10s spread (5-year history)
Shaded red zones = inverted curve (2s10s < 0). Inversion has historically preceded recession with 6-24 month lead time.Recession probability — 12 months ahead
Estrella-Mishkin probit (NY Fed): P(recession) = Φ(-0.5333 - 0.6629 × spread3m10y).
Nelson-Siegel-Svensson parameters
Fit residual RMSE: 0.050 pp. See the NSS methodology page for the parametric form.
| β₀ | β₁ | β₂ | β₃ | λ₁ | λ₂ |
|---|---|---|---|---|---|
| 4.054 | -1.747 | -0.814 | -2.646 | 1.50 | 5.00 |
How to read this country's curve
Look first at the 10-year yield in the headline tiles above — that is the benchmark long-term borrowing cost for this country. Then compare it to the policy rate set by the central bank. If the 10-year is meaningfully above the policy rate, investors expect rates to stay supportive of growth; if it sits below, the market is pricing rate cuts ahead.
Next, check the 2s10s and 3m10y spread tiles. Green numbers mean the curve is sloping up in the normal way (longer bonds yield more). Red numbers mean the curve is inverted — long bonds yield less than short bonds, which historically precedes a slowdown. The deeper the inversion, the stronger the warning signal, although the lag between inversion and recession typically runs 12-24 months.
Finally, the recession probability at the top combines the 3m10y spread with the NY Fed's statistical model. A reading above 30% is the conventional caution threshold; above 50% historically meant a recession was the base case within a year. For non-US countries this is a useful comparative signal but the exact level should be read with care.
Interpreting the NSS parameters for this country
The four estimated betas decompose the curve into orthogonal factors. β₀ is the long-run level — the asymptotic yield as maturity goes to infinity, interpretable as the market's terminal nominal anchor (steady-state real rate plus expected inflation). β₁ is the slope factor; a negative β₁ produces an upward-sloping curve while a positive β₁ flattens or inverts the front end. β₂ and β₃ govern two curvature humps controlled respectively by λ₁ and λ₂ years — the maturities at which each curvature factor peaks. Diebold-Li (2006) show β₀+β₁ converges to the instantaneous short rate and β₀ to the consol yield, providing direct factor-model intuition.
On the recession probability: the reading uses the Estrella-Mishkin (1998) coefficients calibrated on US post-war NBER data. For developed-market peers (Eurozone, UK, Canada, Australia, Switzerland) the cross-country mapping is broadly defensible, but the absolute level is indicative, not literal — local probit re-estimation (Moneta 2005 for the euro area; Chinn-Kucko 2015 for OECD comparators) typically yields slightly weaker, but still significant, predictive coefficients. The reading is best treated as a relative-rank signal across our nine-country set rather than an unconditional probability.
A final caveat: the spread input embeds both an expected-policy component and a term-premium component. When the ACM term premium is compressed by structural demand for duration (LDI flows, central-bank balance-sheet residuals, foreign reserve recycling), an inverted curve can flag elevated probability without indicating that aggressive easing is priced. Cross-checking the model against survey-based policy expectations and against the country's own forward OIS curve disciplines the signal.
What the Bund curve is signalling
With the European Central Bank’s deposit facility rate at 2.25%, the German Bund curve has steepened materially over the past year and now exhibits a textbook upward slope: short-end yields anchored just below the deposit rate, the 10-year Bund around 2.60%, and the 30-year just above 2.90%. The 2s10s spread is firmly positive at over 50 basis points — among the steepest in the developed world. Front-end Bund yields trading slightly below the policy rate is typical for the ECB’s operational corridor, where the deposit rate sets a floor.
Inversion status and term spreads
The Eurozone 3m10y spread is solidly positive, putting the implied 12-month-ahead recession probability under the Estrella-Mishkin probit model in the low single digits. This is a notably benign reading versus the US — and a sharp turnaround from the 2022-2023 episode when the Bund curve was inverted at the front end on aggressive ECB hike expectations. The 2s10s has not been inverted at any point in the past 12 months.
What the curve says about ECB expectations vs market pricing
Decomposing the curve:
- The 2-year Bund yield sits roughly in line with the deposit rate, implying markets expect the ECB to hold rates close to current levels through 2027 with only modest fine-tuning in either direction.
- The 5-year point at 2.30% suggests an average expected deposit rate around 2.0-2.2% over the next five years — consistent with a “neutral” rate framework.
- The 30-year minus 10-year slope (~30 bp) is modest, reflecting limited concern about long-run inflation risks. This is one of the lowest 10s30s slopes among developed sovereigns.
The curve’s overall shape is consistent with the ECB’s communicated message of being at or near neutral. Market pricing is far less dovish than for the Fed, with very few cuts priced in beyond what the ECB has already delivered.
Nelson-Siegel-Svensson fit
The Bundesbank itself uses Nelson-Siegel-Svensson — in fact, its public yield curve estimates were the original empirical workhorse for NSS in the 1990s. Our fit reproduces a level (beta0) close to 3.0, a small negative slope factor (beta1), and modest curvature: a “well-behaved” curve where the parametric fit explains nearly all of the cross-sectional variation in observed Bund yields. See the NSS methodology page for the derivation.
Cross-references
- European Central Bank overview — deposit rate, MRO, meeting schedule.
- Real interest rate tracker — Eurozone real rate vs. global peers.
- Recession probability dashboard — Eurozone vs. all 9 countries.
- Nelson-Siegel-Svensson methodology — the curve-fit framework.