Euro Zone Bond Markets Gear Up for ECB Decision

Euro zone bond yields rose slightly ahead of the European Central Bank's expected interest rate cut. Germany's 10-year bond yield increased, aligning with market anticipation of further rate cuts due to weak economic data. Italy's bond yield also rose, while euro zone inflation was revised lower.

In a subtle shift, euro zone bond yields inched up on Thursday, snapping a two-day decline as markets awaited a pivotal decision from the European Central Bank. Germany's 10-year bond, serving as the euro zone's benchmark, saw a 2.7 basis-point increase, reaching a yield of 2.203%.

Amid widespread anticipation, the ECB is poised to lower interest rates by 25 basis points, setting them at 3.25%. This decision, expected at 1215 GMT, comes as traders seek clues on the potential for continued rate reductions in upcoming meetings.

Recent factors, such as poor economic data and an unexpected dip in inflation below 2%, have led to increased market bets on further rate cuts. As Italy's 10-year yield climbed by 1 basis point to 3.413%, the yield gap between German and Italian bonds narrowed to its smallest margin since July.

(With inputs from agencies.)