Euro Zone Bond Yields Steady as ECB Decisions Loom

Euro zone bond yields remained stable after recent declines, with investors waiting for U.S. inflation data and the European Central Bank's policy decision. The German 10-year bond yield stayed at 2.17%. The ECB is expected to cut rates by 25 basis points, with further cuts being considered. Market reactions will also be influenced by U.S. inflation data and political debates.

Euro zone bond yields steadied on Tuesday after a series of recent declines, with investors eyeing upcoming U.S. inflation data that could provide clues about the Federal Reserve's rate-cutting trajectory and the European Central Bank's (ECB) policy decision later this week.

The German 10-year bond yield, a benchmark for the euro zone, remained relatively unchanged at 2.17%. It had touched a one-month low of 2.147% last Friday. Similarly, Germany's two-year bond yield, which is more responsive to ECB rate expectations, was stable at 2.217%, after hitting a one-month low of 2.208% on Monday.

All indications point to an imminent ECB rate cut of 25 basis points this Thursday, as investors eagerly look for signals regarding the bank's next steps. Traders are fully anticipating this cut and see a 50% chance of another 25 basis point cut in December, though the odds for an October move are smaller. Overall, the markets are predicting a total of 62 basis points in rate cuts by year-end. "The overall message is going to be: disinflation is still on track, growth is a bit weaker than expected. However, the forecasts indicating a return to the 2% inflation goal will take time, emphasizing caution," said Paul Hollingsworth, Chief Europe Economist at BNP Paribas.

(With inputs from agencies.)