Euro zone bond yields inch up after safe-haven rally
TLT•Euro zone government bond yields edged higher on Friday but remained set for a weekly decline, as investors took profits after a safe-haven rally. Markets priced in a 100% chance of an ECB rate hike in December, while euro zone inflation reached 3.8% in September.
1. Yields remain lower this week
German 10-year Bund yields rose 2 basis points on Friday to around 3.428%, but were down 5.7 basis points for the week. French 10-year yields rose 3 basis points to around 4.82%, while their premium over German Bunds narrowed to about 138 basis points from nearly 160 basis points on October 2.
2. Markets assess ECB outlook
Money markets priced in a 100% chance of a December ECB rate hike, up from just below that level earlier in the day; traders do not expect a hike at the central bank’s meeting this month. September euro zone inflation was 3.8%, a five-year high and in line with expectations, while the IMF forecast one more ECB rate hike this year.
