LONDON: Euro zone government bond yields held steady near their lowest levels in months on Thursday as investors looked toward the European Central Bank’s (ECB) policy meeting next week.

Comments from ECB officials this week saying inflation was probably close to its peak have bolstered expectations that the central bank is likely to slow its pace of interest rate increases to 50 bps, from 75 bps previously, at its Dec. 15 meeting.

Germany’s 10-year bond yield, seen as the benchmark for the bloc, rose one basis point (bps) to 1.80% by 1613 GMT, above a two-month low of 1.753% hit the previous day.

A sharp slowdown in inflation in the United States in October and the euro zone in November has encouraged investors to believe the worst may be over in terms of price pressures, causing global yields to drop sharply in recent weeks.

“At the year-end you have some investors finally using their cash to invest,” said Patrick Barbe, head of European investment grade fixed income at Neuberger Berman. Yet many investors say the sharp drop in euro zone yields has gone too far, given that inflation is still running at 10% year on year and that the ECB is set to raise rates to at least 2% next week.

“We are still at a very high level of inflation in the euro zone,” said Camille de Courcel, head of European rates strategy at BNP Paribas Markets.

De Courcel said she expected a 50-bp rate hike from the ECB next week, but said there “is still a risk that they deliver a 75”.