Euro zone yields edge lower before ECB policy meeting
TLT•Euro zone government bond yields edged lower ahead of the ECB policy meeting. Germany’s 10-year yield fell 2.5 basis points to 3.36%, while its 2-year yield dropped 3.5 basis points to 3.07%.
1. Yields move lower
Euro zone government bond yields edged lower on Thursday, tracking oil prices as investors waited for the European Central Bank’s policy meeting. Brent crude futures fell after gaining a day earlier.
2. Rate outlook in focus
Investors expect the ECB to provide no guidance on the rate outlook. Euro short-term rate forwards implied a deposit rate of 2.73% by December and 3.23% by late 2027, compared with the current 2.50%. Insight Investment portfolio manager Harry Jones said resilient growth and energy-driven inflation could require further tightening if the shock persists, while inflation near target gives policymakers room to assess second-round effects.
3. Bond market details
Germany’s 10-year yield, the euro area benchmark, fell 2.5 basis points to 3.36%. The 2-year yield fell 3.5 basis points to 3.07%, after U.S. borrowing costs declined in Asian hours. The French OAT-Bund yield gap was roughly unchanged at 153.50 basis points, after reaching 177.70 last week, its highest level since November 2011.
