LONDON: German bond yields fell on Wednesday as core government debt was buoyed by investors betting that continued low US inflation might delay a rise in interest rates until later this year.
Data released on Tuesday showed US consumer prices increased last month, ending three months of declines, but Chicago Federal Reserve President Charles Evans on Wednesday urged a delay in rate hikes until the first half of 2016.
A majority of Wall Street's top banks see the Federal Reserve holding off until at least September, having previously forecast June.
Atlanta Fed President Dennis Lockhart said the United States was "quite likely" to raise rates by September.
There was little reaction to a German business survey that provided further signs the euro zone's largest economy could be gaining momentum, with attention focused on the bloc's struggle to fend off deflation with the European Central Bank's quantitative easing (QE) programme.
"For sure inflation will remain relatively low in Europe and in the US as well," said Patrick Jacq, a BNP Paribas strategist.
German 10-year yields, the benchmark for euro zone borrowing costs, were down 1 basis point at 0.23 percent. Yields on other top-rated bonds were flat or a tad lower. US 10-year yields were back below 1.90 percent , having touched a 2015 high of 2.25 percent earlier this month.
This has narrowed their yield premium over Bunds to 165 basis points from a historic peak of 189 bps hit two weeks ago when the ECB kicked off its trillion euro QE programme.
Treasuries yields have fallen since the Fed last week cut its inflation outlook and growth forecast.
Although euro zone market measures of inflation expectations have picked up on the back of the ECB's QE programme, they still remain well under the central bank's target of just below 2 percent.
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