Euro Zone Bond Yields Drop Amid U.S. Data and Defense Spending Uncertainty

Euro zone bond yields fell to a two-week low due to weaker U.S. economic data and uncertainties surrounding defense spending in Europe. The German 10-year bond yield dropped, influenced by U.S. Treasury yield declines and German defense budget concerns. Spread changes signal market focus on economic data.

Euro zone bond yields have reached a two-week low, driven in part by a decline in U.S. yields following weaker-than-expected data and uncertainty over defense spending in Europe. Germany's 10-year bond yield, serving as the euro zone benchmark, fell to 2.412% in early trading, marking its lowest point since February 11.

In February, bond yields in the euro zone had risen as investors anticipated increased defense spending amidst U.S. President Donald Trump's talks with Russia over the Ukraine conflict. However, yields have fallen due to a dramatic drop in U.S. Treasury yields and German Chancellor Friedrich Merz's skepticism about a large defense budget increase.

Italy's 10-year bond yield remained stable at 3.492%, while the spread between Italian and German yields was 106 basis points. Following a significant drop in U.S. Treasury yields, the spread between U.S. and European 10-year yields increased, emphasizing the market's focus on muted U.S. economic data and European defense spending strategies.

(With inputs from agencies.)