Euro Zone Bond Yields Inch Up Amid Rate Cut Speculation

Euro zone bond yields rose slightly on Wednesday as investors anticipated more rate cuts from the European Central Bank. Weak economic data from Europe and the U.S. influenced this trend. Germany's bond yields, a euro zone benchmark, and money market pricing indicate heightened expectations for an October rate cut.

Euro zone bond yields edged higher on Wednesday after two days of decline, as investors braced for more rate cuts from the European Central Bank (ECB). The anticipation has been fueled by weak European survey data, a downbeat German business sentiment report, and declining U.S. consumer confidence.

Germany's 10-year bond yield, often viewed as the euro zone benchmark, rose by 3 basis points, hitting 2.163%, after dropping 9 basis points over the previous two sessions. German two-year bond yields, sensitive to ECB rate expectations, climbed 2 basis points to 2.113%. Money market trends show traders now see a 55% chance of an ECB rate cut in October, up from just 15% earlier this week.

Meanwhile, the U.S. Federal Reserve's recent 50 basis point rate cut adds to the speculation. French bond yields rose above Spain's for the first time since 2008 due to budget deficit concerns. The yield gap between French and German 10-year bonds decreased by 2 basis points, while Italy's 10-year yields rose to 3.498%, showing a 132 basis point difference with German yields.

(With inputs from agencies.)