Bond Market Trends and Individual Holdings in Europe (2025 Update)

No time to read?
Get a summary

In recent years, the bond market has attracted a growing share of individual savings, with small investors increasingly placing money into relatively short-term securities. Since mid-2018, short-term government notes with maturities up to twelve months have gained appeal by offering a blend of safety and reasonable liquidity. The European Central Bank began adjusting rates in mid-2019, and the most notable surge in demand has come since late 2022 as markets reacted to policy changes and rate expectations.

The spread between the yields on new government notes and the returns on large bank deposits has widened. Current average yields on these notes stand around 2.21 percent, while typical current accounts offer roughly 0.12 percent. Mortgage products, by contrast, carry an average rate near 3.75 percent. This differential helps explain why governments can fund auctions and meet their financing targets.

Across the six- and twelve-month maturity segments, auction results have shown rates around 3.66 percent initially, with some readings near the 2012 level. While a few observers anticipated rates would push toward four percent, the latest figures hovered near 3.68 percent, shy of the 3.80 percent seen in the prior auction. The upcoming mid-month auctions will include three- and nine-month maturities, which recently traded at roughly 3.53 percent and 3.81 percent respectively.

By May, official data indicated that about 15 billion euros of invoices or notes were held by individuals, representing roughly one-fifth of the total market and second only to holdings by non-residents, which accounted for about 32.9 percent. The weight of private holdings in these financial assets is at an all-time high, a level not seen since 2007 when individuals held about 11 percent of total holdings, just before the major financial crisis beginning with Lehman Brothers.

The peak point for individual investment in government notes was reached in 2008, when about 4.73 billion euros were held, about 9.08 percent of the market. After the EU sovereign debt crisis began in 2012, interest from individual investors in these assets faded for a period, especially under negative rates, lasting from 2016 to 2022. Since then, demand for these instruments has rebounded as investors seek safer opportunities amid market volatility.

Even as demand surged, large banks with ample liquidity did not see an immediate need to increase deposits. Total deposits at major institutions reached about 989 billion euros in June, though banks acknowledged that liquidity planning would eventually require adjustments.

Small and medium-sized banking

Smaller banks have often been the ones to offer higher yields, with some institutions delivering rates above 4 percent. In certain cases, the leading banks in the system have improved their deposit pricing through digital subsidiaries. This trend is evident in examples such as Santander and digital platforms like Banc Sabadell’s online services.

Several online lenders and fintech-style platforms advertise yields above 4 percent for terms ranging from six months to a year. Names such as Banco Mediolanum and other regional financial groups have participated, sometimes in collaboration with partner banks across Europe.

Officials have weighed in on the issue. Nadia Kalvino, a public official in charge of the economy, publicly commented on the relatively low incentive for large banks to raise deposit rates. The industry has argued that any upward pressure on rates reflects competitive forces rather than a directive from policymakers.

The surge in private investor interest emerged late last year and continued into the current period. The Treasury, which operates primarily through the central bank and a modest network of offices, faced operational challenges that temporarily limited in-person customer service. In February, there were measures to streamline online access and reduce crowding, ensuring smoother service through the broader network.

Savers in public debt accumulated substantial holdings, finishing the previous year with significant investments in government notes: around 3.233 billion euros, split between short-term and longer-term instruments. The projections for 2024 point to higher totals as markets remain active and households adjust to changing interest environments.

Overall, the composition of individual holdings has shifted notably, rising far above 2021 levels. The growth has been driven by a pronounced expansion in the personal bond portfolio and related liabilities, with substantial year-over-year increases across the board as households adapt to new interest-rate realities.

No time to read?
Get a summary
Previous Article

Spartak’s Tough Run: Utkin’s Take and the Ural Result

Next Article

New electrical stimulation approach for sleep apnea shows promise