ECB Meeting: Stability Amid Speculation

German 10-year bond yields remained stable, as traders awaited the European Central Bank's policy decisions. The ECB is expected to maintain interest rates while hinting at future cuts. Analysts predict a cautious approach amid high inflation and wage growth. Italy's bond yields and the German-Italian Bund gap also showed minimal fluctuations.

The yield on 10-year German bonds held steady at a three-week low on Thursday, as traders awaited potential policy updates from the European Central Bank (ECB). The benchmark eurozone yield reached 2.44%, rising slightly from Wednesday's 2.408% low.

The ECB is expected to keep interest rates unchanged and may indicate a future rate cut without giving explicit guidance. A policy decision is scheduled for 1215 GMT, followed by President Christine Lagarde's news conference at 1245 GMT.

Money markets predict a 75% chance of a 25-bps rate cut in September, totaling 70 bps by 2024. The ECB's June rate cut was seen as rushed, and the bank is likely to adopt a cautious stance given high domestic inflation and wage growth.

Italy's 10-year bond yield rose 2 bps to 3.73%, as the spread with German Bunds remained stable. Germany's two-year government bond yield, more sensitive to ECB rate expectations, increased by 1.5 bps to 2.79%.

(With inputs from agencies.)