Euro Zone Bond Yields Rise Amid Inflation Data Anticipation

Euro zone government bond yields increased on Tuesday as investors awaited inflation data and monitored geopolitical tensions affecting crude oil prices. Germany's yields, a euro zone benchmark, saw slight increases. The ECB's future rate cuts remain a focus with marginal changes after recent Federal Reserve and ECB comments.

Euro zone government bond yields edged up on Tuesday as investors braced for upcoming inflation data, seeking insights into the European Central Bank's future policy moves. Geopolitical tensions, particularly in the Middle East, continue to impact crude oil prices, which fell on Tuesday following a recent surge driven by Israel-Hezbollah clashes.

Germany's 10-year yield, a key benchmark for the euro zone, rose by 0.5 basis points to 2.25%. Market expectations of ECB rate cuts remained steady after last week's Federal Reserve meeting and cautious statements from ECB officials.

Traders perceive a 65 basis points reduction in rates by year-end, aligning closely with pre-Fed meeting forecasts. Germany's two-year yield, more responsive to rate expectations, also increased slightly by 0.5 basis points to 2.40%. Italy's 10-year yield, serving as a benchmark for peripheral euro area countries, climbed by 2 basis points to 3.61%, widening the yield gap between Italian and German bonds to 135 basis points.

(With inputs from agencies.)