Steady Euro Zone Bond Yields Ahead of Inflation Data Release

Euro zone bond yields remained stable on Tuesday in anticipation of the release of the September inflation data. German inflation cooled more than expected in September to 1.8%, boosting expectations that the euro zone-wide figure will fall below the European Central Bank's 2% target.

Euro zone bond yields remained stable on Tuesday ahead of the release of September's inflation data, expected to indicate a further cooling in price growth within the single-currency bloc.

Data from Monday revealed that German inflation dropped more than anticipated in September to 1.8% month-on-month, raising expectations that the euro zone figure will dip below the European Central Bank's 2% target. The crucial euro zone inflation data is slated for release at 0900 GMT (1100 CET).

Germany's 10-year bond yield, serving as the euro zone benchmark, edged down by 1.5 basis points (bps) to 2.12%. Conversely, Italy's 10-year yield slid 1.8 bps to 3.44%, narrowing the yield spread between Italian and German bonds to 132 bps. Meanwhile, Germany's two-year bond yield, which is highly responsive to ECB rate expectations, hovered at 2.07% following a dip to its lowest since December 2022 at 2.046% on Monday, as market sentiment priced in an 80% probability of another ECB rate cut in October.

(With inputs from agencies.)