Euro Zone Bond Yields React to U.S. Fed Testimony

Euro zone bond yields fell on Wednesday, responding to concerns about monetary policy and political developments. Traders are closely watching U.S. Federal Reserve Chair Jerome Powell's Congressional testimony. German, French, and Italian bond yields experienced declines, with yields moving inversely to prices.

Euro zone bond yields dropped on Wednesday amid heightened concerns over monetary policy and politics, following a rise the previous day. Traders eagerly awaited the second day of testimony from U.S. Federal Reserve Chair Jerome Powell before Congress.

Germany's 10-year bond yield, which serves as the benchmark for the euro zone bloc, decreased by 3 basis points (bps) to 2.55%, after a 4 bps increase on Tuesday. Meanwhile, France's 10-year bond yield fell by 5 bps to 3.211%, narrowing the gap between French and German yields by 3 bps to 66 bps. This spread has been under scrutiny during France's election period.

Italy's 10-year yield also declined, dropping 5 bps to 3.907%, with the gap between Italian and German yields narrowing by 3 bps to 136 bps. Additionally, Germany's two-year bond yield, which is sensitive to European Central Bank rate expectations, was 2 bps lower at 2.909%.

(With inputs from agencies.)