Euro Zone Yields Rise Amid Unexpected Business Growth and Fed Speculations

Euro zone bond yields rose as markets responded to stronger-than-expected business activity data. Germany and UK yields increased following PMI releases. The Federal Reserve's anticipated rate decisions and a weakening U.S. labor market added complexity to bond market predictions.

On Thursday, Euro zone bond yields rose as markets processed encouraging business activity data and awaited insights from the Federal Reserve's symposium in Jackson Hole. Germany's 10-year yield increased by 3 basis points to 2.743%, while the rate-sensitive 2-year yield climbed by 4 basis points to 1.97%.

Peter Schaffrik, chief European macro strategist at RBC, attributed the rising yields to robust purchasing managers' index (PMI) data from the euro zone and the UK. Euro zone businesses saw growth in new orders for the first time since May 2024, signaling a positive trend despite ongoing export challenges.

As traders anticipate Fed Chair Jerome Powell's speech, speculations regarding a potential rate cut in September are gaining momentum. The weakening U.S. labor market, alongside pressure on the Fed, has fueled these dynamics, impacting bond market trajectories globally.

(With inputs from agencies.)