Steadying Euro Zone Yields Amid Middle East Tensions

Euro zone government bond yields remained stable, influenced by European Central Bank rate cut expectations and tensions in the Middle East. Germany's and Italy's bond yields showed little movement, as investors leaned towards safer assets, anticipating potential rate cuts by the ECB in October.

Euro zone government bond yields remained stable on Thursday, influenced by expectations of interest rate cuts by the European Central Bank (ECB) and the escalating conflict in the Middle East. Germany's 10-year bond yield, regarded as the euro zone benchmark, hovered around 2.1%, showing little change.

Recent weak growth indicators and inflation rates below the ECB's 2% target have contributed to lower yields, prompting major Wall Street banks to anticipate the ECB's interest rate cuts in October. This anticipation is reflected in market pricing, which shows a 95% probability of a 25 basis point rate reduction.

Concerns over the Middle East tensions have also driven investors towards the relative safety of German bunds, affecting yield movements. Italy's 10-year bond yield remained mostly unchanged at 3.44%, maintaining the spread between Italian and German 10-year yields at 133 basis points.

(With inputs from agencies.)