Euro Zone Bond Yields Dip Anticipating ECB Rate Cut

On Monday, Euro zone bond yields decreased slightly as investors anticipated a European Central Bank interest rate cut. German, French, and Italian bond yields dipped, reflecting market expectations for the ECB meeting. Fitch's revised outlook for France to 'negative' heightened attention on fiscal and political risks.

Euro zone bond yields saw a modest decline on Monday as investors prepared for an expected interest rate reduction by the European Central Bank scheduled for Thursday. The yield on Germany's 10-year bond, the euro zone's benchmark, decreased by 1 basis point to 2.26%.

In parallel, France's 10-year yield also fell by approximately 1 basis point, aligning with market movements despite Fitch revising France's outlook to 'negative' from 'stable' on Friday due to fiscal policy challenges and political risks. Meanwhile, U.S. bond markets remained closed and economic data releases were minimal, sharpening the focus on the upcoming ECB meeting, where a 25 basis point rate cut to 3.25% is anticipated.

Italy's 10-year yield saw a reduction of 2 basis points, settling at 3.548%, while the spread between Italian and German yields was recorded at 128 basis points. Additionally, Germany's two-year bond yield, which is more sensitive to changing ECB expectations, fell 3 basis points to 2.232%.

(With inputs from agencies.)