Eurozone bond yields little changed after cooled US inflation data

Eurozone bond yields were little unchanged on Wednesday following the release of US inflation data. While the figures indicate a slight uptick in consumer prices, they generally support expectations of a quarter-point interest rate cut by the Federal Reserve in September.

However, investors remain cautious about the potential for a larger rate reduction, as the overall inflationary trend continues to moderate. The benchmark German 10-year bond yield saw minimal movement at 2.179 per cent, reflecting a market sentiment leaning towards gradual policy easing.

Germany’s 10-year bond yield was little changed at 2.179%, slightly lower than where it was before the data. Yields move inversely to prices.

In May, the benchmark German yield has dropped sharply from a roughly six-month high of 2.707 per cent driven by cooled eurozone and US inflation data, reassuring investors that further European Central Bank (ECB) rate cuts are coming this year.

Meanwhile, in the eurozone, bond yields showed slight upward pressure due to a revision in French inflation figures. France’s inflation for July was revised slightly higher to 2.7 per cent year-on-year.

Italy’s 10-year yield was flat at 3.57 per cent, and the gap between Italian and German bond yields was stable at 138 bps.

Germany’s two-year bond yield, which is more sensitive to ECB rate expectations, surged 1.5 bps to 2.354 per cent.

Overall, the bond market appears to be consolidating after recent volatility, with investors closely monitoring economic indicators for further clues on the path of monetary policy.

Attribution: Reuters