Euro Zone Bond Yields Rise Ahead of ECB Decision

Euro zone government bond yields inched higher on Thursday in anticipation of an expected interest rate cut by the European Central Bank. Traders foresee a quarter-point cut, bringing focus to ECB President Christine Lagarde's guidance on economic growth and inflation. Analyst caution on back-to-back cuts remains notable.

Euro zone government bond yields edged up on Thursday as markets awaited a highly anticipated interest-rate cut from the European Central Bank (ECB) later in the day. Markets are largely banking on a quarter-point cut to 3.5% by the ECB, with traders eyeing the possibility of two additional rate cuts this year, though analysts warn that might be overly optimistic.

The key focus will be on ECB President Christine Lagarde's commentary on economic growth and inflation during the post-decision press conference. Michael Leister, Commerzbank's head of interest rate strategy, stated, "Today's ECB projections are key, but the hurdle for back-to-back cuts seems high."

German 10-year Bund yields rose 1.5 basis points to 2.114%, recovering from Wednesday's low of 2.086%. Two-year Schatz yields increased by 2.4 bps to 2.159%, maintaining a tight premium over 10-year debt. Italian and French 10-year bonds also saw movements, with debt sales expected from Germany and Italy soon.

(With inputs from agencies.)