Euro zone bond yields fall on oil price dip, soft U.S. inflation data
TLT•Euro zone yields fall as oil eases and U.S. inflation cools
Euro zone government bond yields fell on Wednesday as oil prices dipped and data showed U.S. inflation cooled slightly on a year-over-year basis last month.
Traders were awaiting more details on talks to reopen the Strait of Hormuz, although an imminent deal looked further away amid new attacks on ships in the Gulf and a hardening of positions by the U.S. and Iran.
Speaking to reporters on Tuesday, U.S. President Donald Trump said: "We totally control the Strait of Hormuz."
Oil prices remained relatively subdued, however, with Brent crude down 0.3% at $88.80 a barrel.
German benchmark yields extend declines after U.S. inflation data
Germany's 10-year bond yield, the benchmark for the euro zone, extended an earlier fall on the back of U.S. inflation data and was last down 4 basis points (bps) at 3.134%.
U.S. inflation came in at 3.4% on a year-over-year basis in July, official data showed, down from 3.5% a month earlier and in line with economists' expectations.
U.S. Treasury yields fell slightly after the data, which also showed core inflation — which strips out volatile food and energy prices — cooled slightly on a year-over-year basis last month.
Germany's 2-year bond yield was last down 3 bps at 2.754%.
Investors and analysts said the U.S. central bank's Federal Open Market Committee will want to look closely at August's inflation reading before it makes its next interest rate decision in September.
"With another round of inflation data due before the September FOMC meeting, it remains all to play for, but today's in-line report was a good start," said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.
