Euro zone bonds steady as traders eye energy and equity markets
TLT•Euro zone government bond yields were steady on Monday as falling oil prices and rising stocks offset safe-haven demand. Germany’s 10-year yield was 3.25%, and markets priced a 66% chance of an ECB rate hike in December.
1. Yields steady
Germany’s 10-year Bund yield edged down to 3.25%, while its two-year yield was flat at 2.98%. France’s 10-year yield fell 1 basis point to 4.75%, and Italy’s dropped 2 basis points to 4.32%.
2. Oil eases inflation fears
Brent crude fell 3% to $95 a barrel, down from above $110 in late October. The decline eased inflation concerns and led traders to scale back expected central bank rate hikes, while stocks rose on Monday.
3. Rate expectations
Market pricing reflected around a 66% chance of an ECB rate hike at its December meeting, with a hike by February fully priced in. Euro zone finance ministers were due to discuss candidates to replace ECB President Christine Lagarde, while U.S. inflation data due Tuesday was the next major scheduled event for bond markets.
