Euro Zone Bonds Steady as Fed Rate Decision Looms

Euro zone government bond yields remained stable as investors awaited the U.S. Federal Reserve's interest rate decision. Moody's unexpected downgrade of France's rating increased the risk premium on French debt. The gap between French and German yields rose, while Italy's yields slightly increased. U.S. Fed decisions significantly influence global markets.

Euro zone government bond yields held steady on Monday, as investors braced for the U.S. Federal Reserve's upcoming decision on interest rates. The market saw an uptick in the risk premium on French government debt following Moody's unexpected downgrade of France's credit rating last Friday.

The yield on Germany's 10-year bond, the euro zone benchmark, remained unchanged at 2.25%, while France's 10-year bond yield increased by 2 basis points to 3.051%. This widened the spread between French and German yields to 80 basis points, the highest since December 5th.

Anticipation of Wednesday's U.S. interest rate decision, where the Fed is expected to cut rates by 25 basis points, is a key focus. Given the U.S. economy's global influence, such rate decisions often have worldwide financial implications. Meanwhile, Italy's 10-year yield saw a 1-basis-point increase, and Germany's two-year bond yield dipped slightly, reflecting European Central Bank rate expectations.

(With inputs from agencies.)