Euro zone government bond yields fell on Wednesday as markets steadied after hotter-than-expected US inflation data jolted Treasuries a day earlier. Germany’s 10-year yield dropped 2 basis points to 3.29%, while France’s fell 5 basis points to 4.741%.
Euro zone yields fell on Wednesday after hotter-than-expected US inflation data pushed borrowing costs higher on Tuesday. Germany’s 10-year benchmark yield declined 2 basis points to 3.29%, while its two-year yield fell 1 basis point to 3.068%. US bond markets were closed for Veterans Day, reducing liquidity and subduing global trading.
Traders increased bets on Federal Reserve rate hikes after October inflation showed price pressures rising more than expected, and a December increase is now seen as certain. Markets also raised expectations of a December European Central Bank hike, which was described as almost guaranteed; ECB chief economist Philip Lane said it would be “prudent” to raise rates if the data did not meaningfully change. France’s 10-year yield fell 5 basis points to 4.741%, narrowing the French-German spread to 144 basis points, and Spain’s 10-year yield fell 4 basis points. Germany sold €2.5 billion of longer-dated bonds, with demand mixed.
