Euro zone bond yields slightly lower; inflation, rate outlook in focus
TLT•Euro zone bond yields edged lower as investors awaited U.S. inflation data for clues about the Federal Reserve’s rate path. Germany’s 10-year yield fell less than one basis point to 3.4589%, while its two-year yield dropped almost two basis points to 3.1036%.
1. Yields edge lower
Euro zone bond yields were slightly lower on Wednesday, continuing to stabilise after a period of sharp volatility. Investors awaited U.S. inflation data; economists expected headline inflation to accelerate to an annual 3.6% in September, driven by rebounding energy prices.
2. Inflation and rate outlook
Germany’s 10-year bond yield, the euro zone benchmark, was down less than one basis point at 3.4589%. Germany’s two-year yield fell almost two basis points to 3.1036%. European Central Bank President Christine Lagarde said euro zone inflation had been driven “predominantly, but not exclusively” by energy prices, and that the ECB would watch for signs of second-round effects, including in wage negotiations. Money markets were close to fully pricing in another ECB rate hike by the December meeting.
