Euro Zone Bond Yields Rise Amid Unclear Rate Cut Signals

Euro zone government bond yields continue to rise after the European Central Bank kept monetary policy unchanged. Traders currently expect rates to remain steady through 2026. ECB President Christine Lagarde emphasized the bank's readiness to adapt, while economists predict risks leaning toward lower rates in the forecast period.

Euro zone government bond yields edged upward early on Monday, extending their climb from the previous week. This follows the European Central Bank's decision to leave monetary policy unchanged and hinting that rate cuts are unlikely for at least another year.

The German 10-year Bund yields, a benchmark for the euro zone, rose to around their highest levels since mid-March, following a 3 basis point increase. This uptick is part of a broader global trend in the fixed-income market. Meanwhile, two-year Schatz yields remained flat after a 13 bp increase last week.

Traders currently expect euro zone rates to stay steady through 2026, with a potential increase by April 2027. ECB President Christine Lagarde highlighted the central bank's flexible stance, leaving all options open for future monetary policy. Economists at Barclays noted the ambiguity surrounding the next rate move, suggesting a tilt toward lower rates over the forecast horizon.

(With inputs from agencies.)