Euro Yields Drop as U.S. Inflation Data Boosts Rate Cut Hopes

Euro area Bund yields saw a decline as U.S. core consumer price inflation fell below expectations, reigniting speculation about potential Federal Reserve rate cuts in 2025. Market reactions included a dip in Germany's 10-year and 2-year bond yields, as well as shifts in European Central Bank rate expectations.

In a notable shift, Euro area benchmark Bund yields decreased on Wednesday, ending a 10-day increase streak. This move came following U.S. inflation data revealing core consumer price inflation lower than anticipated, renewing expectations for potential Federal Reserve interest rate cuts in 2025.

Germany's 10-year bond yield saw a significant fall, further declined after the data release, marking its steepest daily drop since June. Earlier on Wednesday, the yield had reached a peak, but closed down at one of its lowest points for the month.

Shifts in inflation forecasts and potential policy impacts have influenced bond markets across both the U.S. and Europe, with market players now anticipating more active rate cuts by the European Central Bank in the coming years.

(With inputs from agencies.)