European Bond Yields Hit Multi-Month Lows Amid Market Nerves

European bond yields reached multi-month lows, driven by market nerves and anticipated global monetary easing. Key euro zone inflation data and the Federal Reserve meeting will test these expectations. Germany's 10-year bond yield dropped to its lowest since April, while Italy's yield also decreased significantly.

European bond yields touched multi-month lows on Wednesday, influenced by global market nerves and expectations of further global monetary easing this year. These forecasts will be put to the test with the day's euro zone inflation data and the upcoming Federal Reserve meeting.

Germany's 10-year bond yield, the euro zone's benchmark, decreased by two basis points to 2.32%, marking its lowest point since April. If this trend continues, it would represent the fifth consecutive session of declines. Investors are closely watching the euro zone's flash inflation data for July, scheduled for release at 0900 GMT, to gauge the European Central Bank's future policy moves.

Market expectations peg two additional 25 basis point rate cuts this year, following the European Central Bank's easing cycle that began in June. National data has shown mixed results so far, with French consumer prices rising slightly less than expected and German inflation coming in slightly above expectations.

Attention is also on the Federal Reserve meeting slated for later Wednesday. Any rate changes would surprise the market, shifting focus to Fed Chairman Jerome Powell's signals on potential policy easing in September. Italy's 10-year bond yield also hit its lowest since April, decreasing by 2.1 basis points to 3.68%, while the spread between Italian and German bonds narrowed to 135 basis points.

Germany's 2-year bond yield, more responsive to European Central Bank rate expectations, fell by 2 basis points to 2.53%.

(With inputs from agencies.)