Euro Zone Bond Yields Dip Amid Economic Data Fluctuations

Euro zone bond yields edged lower with Germany's 10-year yield dropping 3 basis points. Investors are eyeing economic data and Jackson Hole's central bankers' meeting. U.S. job data sparked recession fears, but recent strong data lessened expectations of deep Fed rate cuts. Next week, further data will provide more insights.

Euro zone bond yields saw a decline on Friday, as Germany's 10-year yield, a key benchmark, fell by 3 basis points to 2.23% after a sharper rise fueled by robust U.S. data on Thursday. Investors are gearing up for a critical week of economic reports and a significant central bankers' meeting in Jackson Hole.

Earlier in August, weaker U.S. jobs data stoked recession concerns, pushing bond yields down due to expectations of steep Federal Reserve rate cuts. However, stronger-than-expected recent data has reversed this trend, with market participants now lessening their bets on a 50 basis point Fed rate cut in September.

Despite volatile week, Germany's 10-year yield is set to close just one basis point higher, down 7 basis points for August. Investors will closely monitor next week's business activity and wage growth data ahead of the European Central Bank's September rate decision. The Jackson Hole conference, headlined by Fed chair Jerome Powell, is crucial as central bankers reassess data and market expectations.

On Friday, traders predicted a 95% probability of a 25 basis point ECB rate cut in September and further cuts totaling 65 basis points by year-end, indicating potential continuous easing. Meanwhile, Italy's 10-year yield dipped with the risk premium over Germany narrowing to near two-week lows.

(With inputs from agencies.)