**EUROZONE DEBT MARKET BRIEF** Eurozone government bond yields are tracking toward a second consecutive weekly decline this Friday, February 20, 2026. This downward movement reflects a complex interplay between shifting central bank leadership, evolving inflation data, and heightened geopolitical friction in the Middle East. **BOND YIELDS AND FISCAL SUPPLY** The benchmark German 10-year Bund yield is currently hovering around 2.74%, maintaining a retreat from recent highs. Markets are currently absorbing a period of record-high supply, with net issuance of European government bonds expected to reach 930 billion EUR for the full year. Refinancing costs remain a primary concern as roughly 1.4 trillion EUR in gross issuance hits the market. This surge in supply comes as the European Central Bank (ECB) continues its quantitative tightening, reducing its holdings by an estimated 384 billion EUR this year. **CENTRAL BANK TRANSITION** Speculation regarding the future of ECB leadership has introduced fresh uncertainty into the bond market. Reports indicate that President Christine Lagarde may consider an early departure before her term ends in 2027. The potential move is viewed as a strategic opening for French President Emmanuel Macron to influence the selection of a successor before the next domestic election cycle. Despite these rumors, the ECB held rates steady at its most recent February meeting, with inflation cooling to 1.7% in January—falling below the 2.0% medium-term target. **GEOPOLITICAL RISK AND SAFE HAVENS** Tensions between the U.S. and Iran have reignited "risk-off" sentiment, providing further support for government debt. The U.S. administration has issued a 10 to 15-day deadline for a new nuclear deal, warning of significant consequences if negotiations fail. While Brent crude oil has surged past 72.00 USD per barrel on supply disruption fears, the heightened regional instability has driven investors toward the relative safety of European sovereign bonds. This flight-to-quality has effectively capped yield increases that might otherwise have been triggered by the heavy issuance schedule. **ECONOMIC OUTLOOK** The broader Eurozone economy remains in a state of modest expansion, with GDP growing by 0.3% in the final quarter of last year. While services continue to drive growth, the manufacturing sector faces headwinds from global trade volatility and higher energy costs. Market participants are now pricing in a very low probability—roughly 2%—of a rate cut at the ECB’s upcoming March meeting, as policymakers remain cautious about underlying core inflation, which still sits at 2.2%.