Euro Zone Bond Yields Hold Steady Amidst US-China Trade Truce

Euro zone government bond yields remained steady following the extension of the US-China trade truce. Traders focused on US inflation data, anticipating a potential Federal Reserve rate cut. Meanwhile, German 10-year yields hovered around 2.6977%. Trading volumes for Bund futures were lower than usual during this period.

Euro zone government bond yields remained steady on Tuesday as the United States and China extended their trade truce for another 90 days, giving markets time to digest upcoming U.S. inflation data. With German 10-year yields around 2.6977%, investors keenly awaited signals that might prompt a U.S. rate cut.

Expected data showed a moderate acceleration in U.S. consumer price inflation for July, leading traders to anticipate the Federal Reserve might cut rates, possibly in September. This expectation contrasts with the European Central Bank's stance, which seems unlikely to alter borrowing costs soon.

The yield premium of U.S. Treasuries over 10-year Bunds has decreased to its narrowest margin since April, due to constrained Bund trading ranges and volatile U.S. yields. Commerzbank analysts highlighted low trading volumes, as Bund futures saw their smallest daily volume since June, affected by the season's market dynamics.

(With inputs from agencies.)