Fed's Signal Eases Euro Bond Pressure Despite ECB Hawkish Stance

Euro zone government bond yields fell after the U.S. Federal Reserve indicated a less aggressive approach than anticipated, lowering U.S. borrowing costs. Despite strong economic data and hawkish European Central Bank sentiments, Germany's bond yields slightly decreased as market bets on ECB rate cuts remained stable.

Euro zone government bond yields slightly decreased as the Federal Reserve indicated a less hawkish stance than anticipated. This change followed the Fed's decision to cut rates and increase T-bill purchases, subsequently lowering U.S. borrowing costs.

Although the Fed cut rates, it suggested a pause in further reductions as officials seek clear signals on the job market and inflation. These signals follow robust economic data and comments by ECB policymaker Isabel Schnabel, hinting more at rate rises than cuts.

Germany's 10-year bond yields fell to 2.85% from a peak since mid-March, while its 30-year yields also dipped. Market bets on ECB rate cuts remained stable, with a small chance of an easing move next summer and a higher likelihood of a rate rise by March 2027.

(With inputs from agencies.)