Euro Zone Bond Yields React to U.S. Inflation and Anticipate Trump-Putin Summit

Euro zone bond yields increased as markets grappled with a strong U.S. inflation report and anticipated a summit between President Trump and President Putin in Alaska. The key U.S. inflation indicator rose significantly, leading to adjusted Federal Reserve expectations, while European markets saw modest activity amidst summer trading conditions.

Euro zone bond yields rose on Friday, driven by the market's reaction to Thursday's strong U.S. inflation data, while eyes turned to the much-anticipated Alaska summit between U.S. President Donald Trump and Russian President Vladimir Putin. German 10-year yields climbed 4 basis points to 2.7453%, with 2-year yields increasing by 1 basis point to 1.9506%.

The surge followed a 7 basis points rise in Germany's 10-year yield on Thursday, influenced by robust U.S. producer price index figures, highlighting continued inflation concerns. These concerns have led traders to revise their expectations regarding future Federal Reserve rate cuts.

Meanwhile, markets are quietly poised, with minimal trading activity characterizing European stocks, which reported marginal gains as the euro strengthened against a weakening dollar. Italian bond yields also edged up, tightening the yield spread with Germany to its smallest in over a decade, as traders awaited further U.S. economic data.

(With inputs from agencies.)