LONDON: Euro zone bond yields edged up on Tuesday as a bounce in oil prices from five-year lows eased speculation that the European Central Bank may ease monetary policy this week.
Falling inflation expectations and hints from Mario Draghi last month that policymakers were readying government bond purchases have sent yields to new record lows across the bloc.
Markets are expecting the ECB to make a move on monetary policy in March.
December is seen as too soon for a consensus to have built within the governing council.
Policymakers are seen as wanting to take time to assess the impact of their purchases of covered bonds and asset-backed securities, and the take-up of new ECB loans to banks on Dec. 11, another project to pump money into the economy.
A Reuters poll on Monday showed no one expects action at this week's meeting. German 10-year Bund yields, which set the standard for euro zone borrowing costs, rose 3 basis points to 0.75 percent, having fallen to an all-time low of 0.69 percent on Monday.
"The rebound in oil prices yesterday eased a bit the pressure on the inflation outlook and the urgent need for the ECB to act has disappeared in the background," Rabobank market strategist Emile Cardonat said.
Brent crude slipped on Tuesday after rising about 4 percent on Monday.
One-year inflation swaps rose to zero again after falling into negative territory on Monday, according to data from brokerage BGC. Lower-rated euro zone bond yields also bounced from record lows, most of them rising 1-2 basis points. Spanish 10-year bond yields were flat at 1.84 percent.
"(The) outlook (is for) continued market correction ahead of the ECB meeting, for which the risk that there will be no new resolutions is increasingly moving to the fore," Bayerische Landesbank senior analyst Marius Daheim said.
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