European Bond Yields 2025: Why Long-Term Debt Is Back in Focus

Last Updated on September 7, 2025

European bond markets kicked off 2025 with sharp moves as long-term government debt rebounded, reversing recent selloffs. Investors rushed back into 30-year securities in the UK and France, locking in some of the highest European bond yields seen in decades.

Why European Bond Yields Are Rising

At the start of January, UK 30-year gilt yields touched 5.75%, their highest level since 1998, while French 30-year yields reached peaks not seen since 2011. Concerns over political instability and growing fiscal deficits pushed borrowing costs higher. But as yields climbed, buyers stepped back in, turning a selloff into a wave of renewed demand.

“Locking in these attractive yields is the priority,” explained Mohamed Kazmi, portfolio manager at Union Bancaire Privée. “Just a few years ago, you had to take emerging-market risk to get anywhere near these levels.”

Political Turbulence in the UK and France

The rebound in long-term European bond yields came against a backdrop of political drama. In France, Prime Minister François Bayrou faces a confidence vote on January 8, 2025, while Britain is dealing with the fallout from Deputy Prime Minister Angela Rayner’s resignation over a tax scandal. These developments added pressure on leaders, especially as governments face tough decisions on taxes and spending.

Despite the turmoil, investor appetite remains strong. The UK recently raised a record £14 billion in bond auctions, signaling continued demand for long-dated gilts.

“There’s no buyers’ strike,” noted David Roberts of Nedgroup Investments. “Investors are actively searching for yield in this high-rate environment.”

Risks on the Horizon

While yields look appealing, analysts warn the calm may not last. France faces three credit rating reviews in early 2025, and the UK’s finance minister, Rachel Reeves, is expected to outline new tax hikes and spending cuts. Both moves could reignite volatility.

“The real concern isn’t just current deficits,” said Mohit Kumar of Jefferies. “It’s whether policymakers will implement unpopular fiscal reforms.”

Why Investors Are Still Interested

Despite risks, long-term debt is drawing hedge funds and major banks. UBS opened a long position in French 30-year bonds, while hedge fund Calibrate Partners called the returns on long-dated debt “compelling.”

As Dan Ivascyn, chief investment officer at Pimco, put it:
“Global fixed income is attractive — not only in absolute terms, but also compared to equities.”

Bottom Line

European bond yields in 2025 highlight both opportunity and risk. Investors seeking steady returns are seizing long-term debt while yields remain elevated, but political and fiscal challenges in the UK and France could spark more turbulence ahead.

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