LONDON: Euro zone bond yields were little changed on Wednesday after falling during the two previous sessions as investors positioned for more rate cuts from the European Central Bank.
Weak European survey data, a downbeat German business morale report, and a fall in US consumer confidence have added momentum to bets that the ECB could lower rates again in October, after two previous 25 basis point cuts this year.
Germany’s 10-year bond yield, the benchmark for the euro zone bloc, rose 0.5 basis points (bps) to 2.14% after falling 9 bps across the previous two sessions.
Yields move inversely to prices. Italy’s 10-year yield rose 0.3 bps to 3.48%, and the gap between Italian and German yields stood at 133 bps.
Germany’s two-year bond yield, which is sensitive to European Central Bank rate expectations, was up 0.5 bps at 2.1%, after falling 16 bps across Monday and Tuesday.
Euro zone yields edge up ahead of priced-in ECB cut
Investors have been keeping a close eye on French yields, which yesterday rose above Spain’s for the first time since 2008 due to concerns about the new government’s ability to tackle the budget deficit.
The gap between French and German 10-year yields was last at 77 bps, up from around 70 bps two weeks ago. It shot to its highest level since 2012 above 85 bps during France’s parliamentary elections.
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