Central Banks Boost Eurozone Bond Buys in 2025 as Dollar Weakens
Central banks have significantly increased their purchases of eurozone bonds in 2025, according to recent data—a trend seen as a positive signal for the euro as the region benefits from growing diversification away from U.S. markets.
Mounting geopolitical tensions under U.S. President Donald Trump—including disputes with allies over trade and defense, as well as criticism of the Federal Reserve—have raised doubts about the U.S. dollar’s safe-haven status. As a result, the dollar has weakened by 9% this year, while the euro has strengthened by 12%.
With momentum on its side, eurozone policymakers are eager to elevate the euro’s role as a global reserve currency. Increased demand from central banks—key reserve managers overseeing trillions of dollars—is particularly significant in this context.
According to Barclays analysis based on data from national debt management offices, official institutions—including central banks and sovereign wealth funds—accounted for 20% of eurozone government bonds sold through syndications so far this year, up from 16% in 2024. Notable allocations include 55% of a 30-year German bond issued shortly after Germany announced a shift to more expansionary fiscal policy in March, and 27% of a 10-year Spanish bond sold in May.
Syndicated bond sales, where governments appoint banks to place debt directly with investors, offer transparency into demand dynamics. These deals generated over €200 billion ($232.4 billion) in funding for eurozone governments last year and remain a critical financing channel.
The share of allocations to official institutions had previously increased from 8% in 2021, following the European Central Bank’s move away from nearly a decade of negative interest rates. However, it remained flat in 2024.
Asian Demand Leading the Charge
Debt market participants note that Asian institutions, especially central banks, have shown particularly strong interest in eurozone bonds this year.
“Some Asian clients are returning to the eurozone government bond space,” said Benjamin Moulle, Global Head of Primary Credit for Sovereigns, Supranationals, and Agencies at Crédit Agricole CIB. “Large Asian central banks are more confident and comfortable than before when investing in euro government bonds.”
Moulle attributes this appeal to the eurozone’s political stability, comparatively lower deficits, and subdued inflation—factors that may give the European Central Bank more leeway to cut rates if necessary.
Carla Diaz Alvarez de Toledo, Director General for Treasury and Financial Policy at Spain’s Economy Ministry, confirmed increased demand for Spanish debt from official institutions across the Nordics, Middle East, and Asia over the past two years.
Despite this rise in demand, analysts caution against overinterpreting the data. Bankers note it’s premature to assume central bank reserve managers are actively reshuffling currency allocations in response to this year’s developments.
A second banker involved in eurozone debt syndications suggested that central banks may simply be extending their holdings into longer-dated maturities after previously avoiding such instruments. Still, they remain largely U.S. dollar-focused, typically revising their allocation strategies later in the year.
“It’s difficult to pinpoint exactly what’s happening on the ground,” said Rohan Khanna, Head of Euro Rates Strategy at Barclays. “I’ve had conversations with sovereign wealth funds from China and Europe. Their consensus is that it’s still too early.”
While some institutions are evaluating whether to deploy new flows outside the U.S., Khanna emphasized that the U.S. Treasury market remains irreplaceable for now.
($1 = €0.8606)
