Euro zone yields edge up before Fed and BoE policy meetings

FRANKFURT: Euro zone government bond yields edged up on Monday with investors on the sidelines ahead of a week packed with policy meetings at central banks including the Federal Reserve and the Bank of England.

A public holiday in Britain contributed to thin trade volumes.

Germany’s 10-year yield, the euro area’s benchmark, rose 0.5 basis points (bps) at 2.51%.

The benchmark yield rose around 5 basis points last week, a more modest increase compared with the volatility of early March when it jumped above 2.9% following Germany’s dramatic spending plans. Bund yields lost ground afterwards on concerns about the adverse economic impact of US tariffs.

“Bunds are unable to defy the US headwinds, and the curve is steepening as European Central Bank expectations for two more rate cuts remain better anchored,” Rainer Guntermann, rate strategist at Commerzbank, said.

US Treasury yields edged up - with the 10-year rising 1.5 bps to 4.31% - after climbing to a one-week high on Friday as data showed that employers added more jobs than economists had expected in April.

“Downside in oil prices should help Bunds to stabilise today after the sharp sell-off on Friday, but the long-end appears vulnerable with 10y yields having broken above the 2.5% mark,” Commerzbank’s Rainer added.

Money markets priced in an ECB deposit facility rate at 1.65% after falling to below 1.55% in mid April after the ECB suggested it was ready to cut rates in response to the potential adverse impact of US tariffs.

Crude prices fell more than 1% on Monday after OPEC+ decided over the weekend to further speed up oil output hikes.