The world's most-influential bond market might just be in Frankfurt.

As speculation deepens that the European Central Bank (ECB) will start quantitative easing just as the Federal Reserve ends its own bond buying, Europe is gaining more leverage over investors globally as the specter of deflation in the region unleashes greater demand for fixed income. The gravitational pull exerted by German bunds may blunt any jump in yields as the Fed moves to raise U.S. interest rates for the first time since 2006.

None other than Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co. (Pimco), said on Aug. 20 the direction of 10-year German bunds sets the “tone” for investors. A day later, Citigroup Inc. cut its yield forecasts for U.S. Treasuries on weakening growth and inflation expectations in Europe after German yields fell below 1 percent.