Euro Zone Yields Plunge Amid Surprise U.S. Inflation Data

Euro zone yields dropped significantly after lower-than-expected U.S. inflation data fueled speculation that the Federal Reserve might cut interest rates by September. U.S. consumer prices were unchanged in May, leading to a 70% chance of a Fed rate cut. Germany and Italy's 10-year bond yields also fell sharply.

Euro zone yields dropped after cooler than expected U.S. inflation caused markets to increase bets the Federal Reserve could cut interest rates as soon as September.

U.S. consumer prices were unexpectedly unchanged in May month on month, and 3.3% year on year, both below analysts' expectations, causing markets to price roughly a 70% chance of a Fed rate cut by September.

Germany's 10-year government bond yield, the benchmark for the euro area, was last down 8 basis points at 2.54%, having been down 2.4 bps before the data. Italy's 10 year yield dropped 12 basis points to 3.94%