Euro Zone Bond Yields Climb Amid Surprising Strong Business Activity in August

Euro zone bond yields inched higher as survey data revealed better-than-expected private sector performance in August, despite a drop in wage growth. Germany's 10-year bond yield rose by 2 basis points, reflecting market adjustments after early August declines. Italy's 10-year yield remained flat.

Euro zone bond yields edged upward on Thursday following survey data indicating the bloc's private sector performed better than anticipated in August, even as wage growth waned. Germany's 10-year bond yield, the euro zone benchmark, saw a 2 basis points (bps) rise to 2.222%, maintaining its level since early August recovery. Market dynamics show yields move inversely to bond prices.

Purchasing Managers' Index (PMI) survey data highlighted unexpectedly strong euro zone business activities for August, driven by robust services. Contrarily, Germany faced a downturn, with its PMI signaling a second consecutive monthly contraction in business activities.

Separate statistics revealed a significant slowdown in euro zone wage growth to 3.55% year-on-year in the second quarter, a decrease from 4.74% in the first quarter. Jussi Hiljanen, SEB's head of European rates strategy, noted that the resilience in the service sector is overshadowing the wage data, marking it as a focal point for the European Central Bank (ECB).

(With inputs from agencies.)