Euro Zone Bonds Find Stability Amid U.S. Treasury Rally

Euro zone bond yields remained steady as U.S. Treasury prices rallied, influenced by weak jobs data. German Bund yields stayed around 2.66%, while French bond yields were stable at 3.424%. Euro zone finance ministers discussed digital finance and stablecoin developments, as the German government prepared an auction of long-term debt.

Euro zone bond yields remained stable on Wednesday, finding some footing thanks to a rally in U.S. government debt. This followed weak job data which strengthened the likelihood of the Federal Reserve reducing interest rates in the upcoming month. Benchmark 10-year German Bund yields hovered around 2.66%, maintaining levels after a slight drop of 1 basis point the day before. The decline was attributed to a U.S. private sector employment survey indicating labor market weakness, counterbalancing earlier optimism about an end to the government shutdown that had previously suppressed bond yields.

The U.S. Treasury market saw prices surge overnight, leading the yield on the 10-year note to decrease by 2.3 basis points to 4.087%. The market had been closed on Monday in observance of Veterans Day. Moreover, the House of Representatives was set to vote later on Wednesday on a measure to restore funding to government agencies and conclude the prolonged 42-day shutdown.

In Europe, a meeting of the 27 euro zone finance ministers took place in Brussels, focusing on the advancements in digital finance, the digital euro, and stablecoin innovations. Isabel Schnabel, a member of the ECB's Executive Board, addressed these issues during an event in London. Meanwhile, Germany moved forward with plans to auction approximately 2.5 billion euros worth of debt due in 2046 and 2056. Commerzbank analysts suggested that while recent Bund auctions faced challenges, the lack of scheduled ultra-long supply for the next year would likely boost demand. French bond yields, reflecting concerns over long-term fiscal stability, remained stable at 3.424%.

(With inputs from agencies.)