Euro Zone Bond Yields Await ECB and U.S. Inflation Signals

Investors in the euro zone are cautious as they anticipate the European Central Bank's policy decision and key U.S. inflation data. German and French bond yields show slight fluctuations, while ECB policymakers downplay the likelihood of significant rate cuts. Anticipation builds for further economic indicators.

Euro zone bond yields are in a holding pattern as investors await the European Central Bank's critical policy announcement and pivotal U.S. inflation data. On Tuesday, Germany's 10-year yield edged up slightly to 2.126%, marking a modest increase from its recent low of 2.03% last week.

Across the euro zone, bond yields have generally declined, reflecting a dimming growth outlook. Yet, European Central Bank rate-setters are tempering expectations for major easing in Thursday's meeting. SEB's strategist, Jussi Hiljanen, notes the ECB's hesitance for a 50 basis point rate cut until more progress is evident in countering inflation.

The investment community is currently pricing in a 25 basis point cut, with minimal expectation for a larger cut—a sharp decline from previous anticipation. In France, yields remained steady amid political uncertainties, while U.S. inflation data may influence the Federal Reserve's rate decision next week.

(With inputs from agencies.)