Eurozone Bond Yields: A Tale of Anticipated Rate Shifts

Eurozone benchmark bond yields are near nine-month highs as investors await the ECB's upcoming meeting following the Federal Reserve's rate cut. Strong economic data and ECB policymaker comments have pushed German Bund yields up. Markets anticipate the ECB holding rates steady, despite some expectations of future hikes.

Eurozone benchmark government bond yields hovered near nine-month highs late Thursday as investors turned their attention to next week's European Central Bank meeting. This shift in focus followed the Federal Reserve's anticipated rate cut and its announcement of larger purchases of short-dated bills, which subsequently lowered U.S. borrowing costs.

German 10-year Bund yields, the benchmark for the eurozone market, fell 1.4 basis points to 2.842% on Thursday. Earlier this week, strong economic data and comments from ECB policymaker Isabel Schnabel, suggesting a rate hike, pushed Bund yields to their highest since March amid Germany's increased fiscal spending.

ECB President Christine Lagarde highlighted the economy's resilience and suggested that growth projections might rise. However, market speculation on ECB policy changes remains. Traders now see a slim chance of an ECB rate cut next summer. German 30-year yields, sensitive to long-term fiscal issues, showed little change after peaking on Wednesday.

(With inputs from agencies.)