ECB's Rate Cut Sparks Bond Yield Rise in Euro Zone

Euro zone bond yields increased after the ECB cut interest rates, keeping an eye on inflation. Germany's and Italy's bond yields saw a rise, while the yield gap between other European bonds narrowed. Focus turns to the U.S. Federal Reserve's impending rate decision.

Euro zone bond markets experienced a surge in yields following the European Central Bank's recent interest rate cut, with Germany's 10-year benchmark bond yield climbing by approximately 2 basis points to 2.21% on Friday. This marks the third consecutive day of yield increases.

Despite the ECB's 25 basis points reduction, President Christine Lagarde expressed concerns over persistent domestic inflation and noted looming uncertainties. Analysts remain divided on the ECB's signals regarding the pace of future rate cuts.

As the European markets react, attention has shifted to the United States, where the Federal Reserve is expected to announce rate cuts soon, potentially signaling a more methodical approach. Markets watched closely as Italy's bond yield rose and the gap between yields narrowed across Europe.

(With inputs from agencies.)