UPDATE 1-Bund yields flat around multi-week lows, EU summit in focus

While markets priced in more Federal Reserve rate cuts, the European Central Bank has been firmly on ‌hold since last summer, reducing volatility in the euro area's fixed-income market. Germany's 10-year government bond yield, the euro area's benchmark, was flat at 2.80%, after hitting 2.793% a day earlier, its lowest level since January 14.

Euro zone benchmark Bund yields were roughly ​unchanged on Thursday not far from multi-week lows ​as investors awaited further U.S. data for ‌guidance, ​though any spillover into the euro area is expected to be limited. While markets priced in more Federal Reserve rate cuts, the European Central Bank has been firmly on ‌hold since last summer, reducing volatility in the euro area's fixed-income market.

Germany's 10-year government bond yield, the euro area's benchmark, was flat at 2.80%, after hitting 2.793% a day earlier, its lowest level since January 14. Investors will closely watch European Union ‌leaders meeting on Thursday which will discuss ways to lower energy prices and other proposals to support the bloc's ‌economy.

French President Emmanuel Macron said on Thursday that the European Union should make concrete decisions by June on how to boost the region's competitiveness, after reiterating his call for more joint debt issuance in the euro area to fund investment. "Investors continue to like EU bonds, with another heavily oversubscribed ⁠order ​book for the dual tranche ⁠EU deal on Tuesday," said Michiel Tukker, senior rate strategist at ING, after arguing that new joint-issuance is unlikely to be approved on Thursday.

"Spreads for ⁠EU bonds in the 10-year area are just below 30 basis points (bps)," he added. Italy's 10-year government bond yields fell one bp to ​3.40%. The gap versus Bunds was at 59 bps after falling to 53.50 in mid-January, its lowest level ⁠since August 2008. U.S. Treasury yields edged up, with the benchmark 10-year flat at 4.17%, after climbing the day before as economic data dented expectations ⁠that ​the Fed could have sufficient leeway for a rate cut in the near term. Harsh weather in the U.S. affected the survey of households, resulting in a below-average response rate of 64.3%, causing some economists to caution against reading ⁠too much into the decline in the unemployment rate from 4.4% in December. U.S. inflation data is due on Friday ⁠and will be the next indicator ⁠for the market on the rate outlook.

Money markets priced in a 23% chance of an ECB rate cut by December. Germany's 2-year yield, which is more sensitive to expectations for ‌policy rates, was ‌up 0.5 bps at 2.06%.

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