Euro Zone Bond Yields Drop as ECB Rate Cut Speculations Rise

Euro zone bond yields fell for the second consecutive session on Tuesday as investors increased their expectations for a European Central Bank rate cut in October after weak economic data. The German 10-year bond yield dropped 1 basis point to 2.161%, while traders now see a 45% chance of an ECB rate cut.

Euro zone bond yields dropped for the second consecutive session on Tuesday, driven by investors' growing expectations of another European Central Bank rate cut in October. This came after weak economic data released on Monday.

Germany's 10-year bond yield, which serves as the benchmark for the euro zone, fell by 1 basis point to 2.161%. This follows a 5 basis point drop on Monday. Yields of Germany's two-year bonds, more sensitive to ECB rate expectations, also saw a decline.

Market pricing on Tuesday indicated a roughly 45% chance of an ECB rate cut in October, a significant increase from the 15% chance estimated at the start of the week. Monday's survey data indicated a sharp, unexpected contraction in euro zone business activity, further influencing investor sentiment.

(With inputs from agencies.)