Euro zone government bond yields drop after Fed, eyes on BoE

Euro zone government bond yields edged down on Wednesday after Federal Reserve officials indicated they still expected to cut rates by 75 basis points this year. ** German 2-year bond yields, which are more sensitive to interest rate expectations, fell 4.5 bps at 2.88%.

Euro zone government bond yields edged down on Wednesday after Federal Reserve officials indicated they still expected to cut rates by 75 basis points this year. ** Markets await the outcome of the Bank of England policy meeting at 1200 GMT.

** Germany's 10-year government bond yield, the euro zone's benchmark, was down 1.5 basis point (bp) at 2.42%. ** Money markets priced in an around 85% chance of an ECB rate cut of 25 bps by June from around 80% late on Wednesday and 90 bps in 2024 from 85 the day before.

** The gap between Italian and German 10-year bond yields widened to around 124 bps after falling to its lowest in over two years last week at 115.40 bps. ** German 2-year bond yields, which are more sensitive to interest rate expectations, fell 4.5 bps at 2.88%.