Euro area benchmark Bund yield hits 11-week high after US data

European rate expectations and government bonds have largely moved in line with their U.S. equivalents in recent months, despite economic growth data in Europe significantly underperforming that of the United States. Markets also reduced bets on European Central Bank monetary easing and are pricing around 110 basis points of cuts in 2024, around 10 bps fewer than before the U.S. data.

Euro zone government bond yields rose on Tuesday echoing moves in the United States after hotter than expected U.S. inflation data caused markets to reduce expectations of imminent central bank rate cuts. Germany's benchmark 10 year bond yield the benchmark for the currency bloc, was last up around five basis points on the day at 2.42%, its highest since Dec. 1.

The U.S. data showed the Consumer Price Index rose 0.3% on a monthly basis in January, above the 0.2% increase expected by economists polled by Reuters. On a year-on-year basis, it gained 3.1% versus the 2.9% estimated growth. European rate expectations and government bonds have largely moved in line with their U.S. equivalents in recent months, despite economic growth data in Europe significantly underperforming that of the United States.

Markets also reduced bets on European Central Bank monetary easing and are pricing around 110 basis points of cuts in 2024, around 10 bps fewer than before the U.S. data. Germany's two year yield, which is sensitive to moves in rate expectations, was last up around 7 basis points on the day at an 11-week high of 2.78%, having traded slightly lower before the U.S. data.