LONDON: German bond yields held firm in holiday-thinned trading on Monday, failing to take much impetus from better-than-expected euro zone inflation data or efforts by policymakers to play down the impact of China's slowing economy.
One speech in particular by US Federal Reserve vice-chair Stanley Fischer on Saturday kept alive the chance that the Fed will raise interest rates next month, the first increase in nearly a decade.
A rate hike from the world's largest economy would be felt across global markets.
Yields on U.S Treasuries and other top-rated benchmark bonds would probably rise sharply.
Other speakers at a central bankers' conference in Jackson Hole, Wyoming -- including the Bank of England's Mark Carney and the European Central Bank's Vitor Constancio -- said their economies could withstand the recent rout in China, which has set European and Asian stocks on course for their worst monthly drop in three years.
One of the fears is that reduced consumption from China will put downward pressure on already depressed oil prices and keep consumer price growth muted.
Euro zone inflation was the same in August as in July year-on-year at 0.2 percent, better than the 0.1 percent predicted by Economists in a Reuters poll.
Some market gauges indicate the euro zone may be headed back into deflation in a year's time.
While consumer price growth remains far from the ECB's target of around 2 percent, few are expecting the European Central Bank to announce more stimulus measures at its meeting this week.
"Despite sharply lower inflation expectations and slipping consumer price inflation in August, further policy easing looks premature," said Commerzbank strategist Rainer Guntermann.
Data also showed on Monday that German retail sales rose month-on-month at their strongest pace in nine months in July, reinforcing expectations that private consumption will support growth in Europe's largest economy this year.
German 10-year yields -- the euro zone benchmark -- were unchanged on the day at 0.73 percent while all other equivalents were also broadly flat on the day.
Traders said volumes were low because of a bank holiday in Britain, while month-end reporting also shackled investor activity.
While the inflation data was slightly above expectations, some analysts said it would not bring much cheer to ECB policymakers who will likely revise down their forecasts for consumer price growth this week.
In a note to clients, Barclays said stubbornly low inflation could even encourage the ECB to spring a policy surprise on Thursday.
"In all, we think the latest set of inflation data remain consistent with our recently downwardly revised euro area inflation profile for this year and next, and with our expectation that the ECB will likely engage in additional accommodative monetary policy measures by year-end, possibly as early as this week."
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