Euro zone yields rise, gap between German and US borrowing costs smallest in a month

Euro zone spreads were little changed with the gap between 10-year German and Italian debt at 78 bps and 10-year German and French bonds at 79 bps.

Benchmark European gas prices steadied on Thursday, but hit a 15-week high the day before. Brent was also down a fraction at $84.90 a barrel.

Markets currently see around a 90% chance of an ECB rate increase by its September meeting — that would be its second this year after June's hike — and a good chance of a third move by year-end.

A rate hike at next week's meeting seems unlikely, but because of the move higher in energy prices, "ECB officials are likely to be more comfortable striking a somewhat more hawkish tone than would have been the case a few weeks ago," said Henry Cook, Europe economist at MUFG.