Euro zone bond yields extend rise after US data

Money markets price in 86 bps of ECB rate cuts this year from 89 bps before U.S. data while still fully pricing a first 25 bps move by June. Data released earlier this week showed that euro zone inflation fell more than expected to 2.4% in March from 2.6% in February, solidifying bets on a June cut.

Euro zone government bond yields extended their rise after stronger than expected U.S. jobs data, suggesting the Federal Reserve could delay the easing of its monetary policy. U.S. employers hired far more workers than expected in March while raising wages, suggesting the economy ended the first quarter on solid ground.

"The Federal Reserve's dashboard still has some warning lights to deal with before signalling the all-clear for cutting," Sophie Lund-Yates, lead analyst at Hargreaves Lansdown, said following the data. The dominance of the U.S. economy and the similar path of inflation across it and the euro zone means U.S. data and Treasuries tend to influence their euro zone peers.

Germany's 10-year bond yield, the benchmark for the bloc, was last up 4 basis points (bps) at 2.39%, after being up 1.5 bps before data. It has risen 11 bps in a week after some strong U.S. economic data, hawkish comments from Fed officials, and oil prices hitting their highest since October at $90 a barrel.

Germany's two-year bond yield, anchored to European Central Bank interest rate expectations, was last up one bp at 2.87% and on track for ending the week 4.5 bps higher. Money markets price in 86 bps of ECB rate cuts this year from 89 bps before U.S. data while still fully pricing a first 25 bps move by June.

Data released earlier this week showed that euro zone inflation fell more than expected to 2.4% in March from 2.6% in February, solidifying bets on a June cut. Italy's 10-year bond yield was up 6.5 bps from Thursday, trading around 3.78%.

The spread over Germany's 10-year yield stood at 137 bps, up from a more than two-year low of 115 bps in March.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)