Euro zone yields fall after U.S. jobless claims rise

"We continue to expect labour market developments, alongside CPI data, to guide the (Federal Reserve) to start easing in June." Longer-dated yields steadily ticked downwards after the data, with the U.S. 10-year Treasury yield falling by around 3 bps to stand slightly lower.

Euro zone bond yields fell on Thursday after data showed U.S. weekly jobless claims rose more than expected, adding to signs that the global economy is cooling. Germany's 10-year bond yield dropped 5 basis points (bps) to 2.353%, falling for a second day after a large increase at the start of the week .

The number of Americans filing new claims for unemployment benefits increased to a two-month high last week of 221,000, data showed, up from 212,000 the previous week and above economists' expectations. Some economists cautioned that an early Easter could have distorted the figures slightly. "We think the underlying trend is beginning to rise," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "We continue to expect labour market developments, alongside CPI data, to guide the (Federal Reserve) to start easing in June."

Longer-dated yields steadily ticked downwards after the data, with the U.S. 10-year Treasury yield falling by around 3 bps to stand slightly lower. The yield on Italy's 10-year yield , which tends to swing more than other bonds, was down 12 bps at 3.713%. The dominance of the U.S. economy and the similar path of inflation across the two economic zones means euro zone bonds tend to track their U.S. peers.

Shorter-dated yields, which are more sensitive to expectations about central bank interest rates, were less affected on Thursday, with investors sticking to their bets that interest rates will fall sometime in the summer. Germany's two-year yield was down only slightly at 2.856%. Bonds have bounced around this week, with yields rising sharply on Tuesday after strong U.S. manufacturing data, before dipping on Wednesday after a weaker U.S. services report.

The key data this week is Friday's U.S. employment reading for March. The attention will then turn to U.S. consumer price index inflation (CPI) and the European Central Bank decision next week. Michiel Tukker, rates strategist at ING, said German bond yields should remain more anchored than those in the U.S., where the economy is stronger and yields could climb further.

Yields have risen in both markets this year as investors have reined in bets on rate cuts. But the market thinks the Fed is likely to lower borrowing costs less than the ECB. "Earlier this week we've briefly seen a 200 basis point spread between 10-year US Treasury and Bund yields, and at least near term we think there can be further widening," Tukker said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)