Euro Zone Bonds Hit a One-Month High Amid Rate Cut Uncertainty

Euro zone government bond yields reached a one-month high as investors assessed central bank rate cut expectations for 2025. The Federal Reserve's recent announcements about anticipated rate cuts put pressure on U.S. yields, subsequently impacting global markets. ECB President Christine Lagarde indicated a near-achievement of their inflation goal.

Euro zone government bond yields surged to a one-month peak on Monday as investors wrestled with central bank rate cut forecasts for 2025. The Federal Reserve's announcement last week, suggesting a reduction in expected rate cuts, drove U.S. government bond yields higher, influencing markets worldwide.

Germany's benchmark 10-year bond yield climbed to 2.327%, its highest since November 22, rising around 4 basis points. This increase came amid lower trading volumes due to the holiday season, possibly intensifying price shifts.

ECB President Christine Lagarde expressed confidence that the euro zone was nearing the central bank's medium-term inflation target, despite recent rate cuts. Lagarde emphasized that the battle against inflation continues, as services inflation remained stubbornly high at 3.9%. Investors now face a volatile landscape as they anticipate policy changes and market responses.

(With inputs from agencies.)