Euro zone government bond yields edge up as focus shifts to policy paths

Tehran said last week it had no plans for retaliation against an Israeli attack in a response that appeared gauged towards averting regional war. German 10-year bond yields, the benchmark for the euro zone, were up 1.5 basis points (bps) at 2.51% after hitting 2.523%, their highest since late November.

Euro zone government bond yields edged up on Monday as fears of an immediate military escalation in the Middle East receded and investors shifted their focus to inflation risks and the European Central Bank's monetary policy path. Tehran said last week it had no plans for retaliation against an Israeli attack in a response that appeared gauged towards averting regional war.

German 10-year bond yields, the benchmark for the euro zone, were up 1.5 basis points (bps) at 2.51% after hitting 2.523%, their highest since late November. Money markets discounted 72 basis points of ECB monetary easing in 2024, which implies two 25 bps rate cuts and an 88% chance of a third move by year-end.

The gap between Bund yields and 10-year U.S. yields -- a gauge of the monetary policy divergence between the U.S. and the euro zone – was at 213 bps. It hit last week 220.9 bps, its highest level since November 2019. Germany's 2-year government bond yield, more sensitive to changes in policy rates, was up at 3.01%.

Italy's 10-year government bond yield, the benchmark for the euro area periphery, rose 0.5 bps to 3.91%.

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