Euro zone bond yields steady; inflation, rate outlook in focus
TLT•Euro zone bond yields were broadly steady as investors awaited U.S. inflation data, with Germany’s 10-year yield at 3.4644%. Markets were pricing in another European Central Bank rate hike by December.
1. Yields little changed
Euro zone bond yields held broadly steady on Wednesday after a period of sharp volatility. Germany’s 10-year yield was little changed at 3.4644%, while its two-year yield fell about 1.5 basis points to 3.1087%.
2. Investors await inflation data
Economists expected U.S. headline inflation to accelerate to an annual rate of 3.6% in September, driven by rebounding energy prices. Investors were watching the data for clues about the Federal Reserve’s interest-rate path.
3. ECB outlook in focus
ECB President Christine Lagarde said euro zone inflation had been driven “predominantly, but not exclusively” by higher energy prices, and said the bank would watch for signs of second-round effects, including wage demands. ECB Governing Council member Pierre Wunsch said the bank would likely have to hike again, while noting high uncertainty; markets were pricing in another hike by December. The ECB has raised rates twice this year, by 25 basis points each time.
