Euro zone bond yields flat as traders wait for more inflation data
Euro zone bond yields were little changed on Friday as investors awaited bloc-wide inflation figures after soft German inflation data in the prior session raised the prospect of more interest rate cuts by the European Central Bank this year.
The German 10-year bond yield, the benchmark for the euro zone, slipped 0.8 basis points to 2.28%, while the interest rate sensitive twoyear bond yield was little changed at 2.36%.
The two-year German yield fell to a threeweek low of 2.33% on Thursday after data showed German inflation fell more than expected in August.
While traders were almost fully pricing in the chance of a 25-basis-point rate cut by the ECB in September, the odds of another such move in October rose to 60% following the
German data.
Italy’s 10-year yield was lower by 0.5 basis points? (bps) at 3.66%, and the gap between Italian and German bunds was at 138 bps.
Euro zone bond yields were little changed on Wednesday after rising the previous day, as a light economic calendar left the focus of global markets on chip company Nvidia’s earnings report after the US close.
German 10-year bond yield, the benchmark for the euro zone bloc, fell 0.9 basis points (bps) to 2.27%.
The yield, which moves inversely to the price, hit a one-month high of 2.3% on Tuesday. Italy’s 10-year yield was lower by 1.9 bps at 3.65%, and the gap between Italian and German yields narrowed 1.2 basis points to 137 bps.
Germany’s two-year bond yield, which is more sensitive to European Central Bank rate expectations, was little changed at 2.4%.
European stock markets diverged in opening deals on Friday before the release of US and eurozone inflation data that could shed light on the path of interest rates in the two major economies.
The Frankfurt DAX fell by almost 0.1 percent to 18,898.11 points, a day after closing at a record high.
The Paris CAC 40 rose by 0.3 percent to 7,662.91 points despite revised figures showing the French economy grew less than previously estimated in the second quarter at 0.2 percent.
Inflation in France, however, slowed to 1.9 percent, falling under the European Central Bank’s two-percent target for the first time since August 2021.
London’s FTSE 100 gained 0.3 percent to 8,406.77.
Eurozone inflation figures are due later in the day and could fuel expectations of an ECB rate cut next month.
The US Federal Reserve’s preferred inflation indicator is also due later on Friday and could give an idea of the possible size of an expected rate cut in September.
European shares inched up on Thursday, with media and technology stocks boosting the index, bucking a global dip after Nvidia’s quarterly results failed to impress investors.
The pan-European STOXX 600 index was up 0.2%% by 0712 GMT.
Media stocks gained 0.5%, led by a 2.3% jump in Universal Music Group.
The tech sector rose 0.3%, boosting the index as European investors shrugged off Nvidia’s quarterly forecast that failed to meet the lofty expectations of global investors.
In contrast, the oil and gas sector dropped 0.2%, dragged down by a nearly 2% fall in Equinor.
Spain’s benchmark IBEX 35 gained 0.1% after data showed that inflation fell to 2.4% in August.
Data on European economic and business sentiment is due at 0900 GMT, while German consumer prices figures are expected at 1200 GMT.
Markets will also look out for commentary from European Central Bank’s chief economist Philip R. Lane, who is participating in a panel at 0915 GMT.
Other ECB deputy governors such as Aino Bunge and Olli Rehn also are taking part in panel discussions.
Among other moving stocks, Pernod Ricard gained 2% after the Western spirits maker reported full-year sales that were largely in-line with forecasts.