European Yield Curve Is Steepening, Risk Compensation Signals Return

European bond markets are undergoing a significant transformation with a steepening yield curve, marking a profound shift compared to the past decade. According to analysis by Neuberger Berman portfolio manager Patrick Barbe, reported by Jin10, the widening gap between long-term and short-term bonds reflects a market dynamic that is entirely different from the prolonged low-yield era.

Bond Market Transformation After a Decade of Stagnation

This steeper curve now offers substantial compensation for duration risk and holding periods—something that has practically disappeared over the last decade. This phenomenon indicates that investors are once again being rewarded for their willingness to hold longer-term bonds. This structural change reflects a normalization of the bond market following a period characterized by very low yields and a relatively flat curve.

Recent Yields Reflect a More Attractive Curve Structure

Current market conditions show two-year bond yields in the eurozone slightly above 2%, while German 10-year bonds reach 2.837% and France at 3.424%. For very long-term bonds (30-year tenor), Germany records a yield of 3.485%, while France stands at 4.364%. These data points indicate an increasingly steep yield curve, providing clear differentiation across various tenor segments in the European bond market.

This development suggests that a more favorable curve structure is now available for investors willing to take on long-term risk—an opportunity that was not present in recent years. The current shape of the curve reflects a recalibration of the European bond market toward healthier and more competitive conditions.