Euro Zone Bond Yields Edge Higher Amid U.S. Economic Concerns

Euro zone government bond yields slightly increased after a turbulent week dominated by concerns over the U.S. economy. Investors are keenly awaiting U.S. inflation data to understand potential interest rate cuts by the Federal Reserve. Yields for German and Italian bonds also saw minor upticks.

Euro zone government bond yields edged higher on Monday after a volatile week dominated by concerns surrounding the U.S. economy. Investors are now eagerly awaiting U.S. inflation data to gauge the extent of interest rate cuts by the Federal Reserve this year. The German 10-year bond yield, serving as the benchmark for the euro zone bloc, rose 2.5 basis points to 2.247%, climbing back from a seven-month low of 2.074% observed last Monday.

Last week, euro zone bond yields rebounded from multi-month lows. Concerns about a slowdown in U.S. jobs growth, unraveling Japanese yen-funded trades, and disappointing earnings among large tech firms drove investors towards the perceived safety of bonds. Investors will focus on U.S. consumer prices data due on Wednesday, with softer-than-expected numbers potentially sparking discussions of a more substantial 50-basis-point rate cut by the Fed in September. Current odds for such a move stand at 47%, according to CMEGroup's Fedwatch tool.

Germany's two-year bond yield, which is more sensitive to European Central Bank rate expectations, rose by 2.9 basis points to 2.41%. Italy's 10-year yield increased by 2 basis points to 3.655%, while the yield spread between Italian and German bunds narrowed by 3 basis points to 141 basis points.

(With inputs from agencies.)