UPDATE 2-Euro zone bond yields dip to multi-week lows, US data 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 down 1 basis point (bp) after earlier falling to 2.783%, its lowest level since January 14.

Euro zone benchmark ​Bund yields fell slightly on Thursday to multi-week lows as ​investors looked to 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 down 1 basis point (bp) after earlier falling to 2.783%, its lowest level since January 14. U.S. 10-year Treasury yields fell 4 bps on the back of soft weekly jobless ‌claims data, helping pull euro zone yields slightly lower.

Treasury yields climbed 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. Euro zone investors were closely watching the European Union leaders meeting on Thursday that was set to address ⁠ways to lower energy prices and other proposals to support the currency bloc's economy.

French President Emmanuel Macron said on Thursday the EU 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 a 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. Italian 10-year government bond yields were down 2 bps after earlier ⁠falling to 3.386%, the lowest since late November. Yields fall when prices rise and vice versa.

The yield gap versus Bunds was ⁠at 59 bps after falling ⁠to 53.50 in mid-January, its lowest level since August 2008. Money markets priced in a 23% chance of an ECB rate cut by December.

Germany's 2-year yield, which is sensitive to expectations for policy rates, ‌was flat at 2.049%.

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