Euro Zone Bond Yields Steady Amid U.S. Economic Data Fluctuations

Euro zone bond yields showed minimal change following a slight increase in U.S. consumer spending in August. Germany's Bund yields fell, and U.S. Treasuries led the euro area's fixed income market. Traders have scaled back Federal Reserve rate cut expectations while eyeing European Central Bank steady rates.

Euro zone government bond yields remained largely unchanged after U.S. data revealed a marginal rise in consumer spending for August. According to the U.S. Commerce Department's Bureau of Economic Analysis, consumer expenditure—a major economic driver—increased by 0.6% last month following a consistent 0.5% rise in July.

The 10-year German Bund, serving as the euro area's benchmark, saw yields drop 4 basis points to 2.73%, despite initial declines of 3 basis points prior to the U.S. data release. The market anticipated a moderate inflation reading, setting the scene for further market response.

This week, U.S. Treasuries led the euro area's fixed income market, with investor uncertainty surrounding the Federal Reserve's potential easing measures. Meanwhile, the European Central Bank is expected to maintain steady rates into early 2027. Market forecasts for the Federal Reserve's policy have been realigned, with future rate cuts anticipated at 100 basis points by end-2026, and next month's easing move priced at an 80% probability. The possibility of a 25 basis point ECB rate cut by July was estimated at 40%.

(With inputs from agencies.)