Euro Drama: Bond Yields Hold Steady Amid ECB Policy Speculation

Euro zone bond yields remained stable amid speculation about ECB's policy moves. The German 10-year yield held at 2.85%, while shorter-dated yields saw minor adjustments. The euro's strength raised questions about potential rate cuts, although rising oil prices countered its disinflationary effect. The US Federal Reserve kept interest rates unchanged.

Euro zone bond yields saw little movement on Thursday as investors speculated about potential policy changes by the European Central Bank (ECB). Concerns over the euro's strength and its potential impact on ECB decisions kept markets on edge, despite the U.S. Federal Reserve's decision to maintain current interest rates.

Germany's 10-year yield remained steady at 2.85%, while its two-year yield settled at 2.08%, following recent fluctuations. Meanwhile, the euro, after recent gains, traded just below $1.20, prompting discussions on its effect on import costs and inflation in the euro zone.

ECB policymaker Martin Koch expressed that further euro appreciation could lead to rate cuts, although other central bankers remained cautious. With rising oil prices offsetting the euro's gains, markets awaited a definitive move above $1.20 to anticipate any ECB rate cut. In the United States, the Fed left interest rates unchanged, noting persistent inflation and labor market stabilization, with no immediate plans for rate hikes.

(With inputs from agencies.)