Calm Before the Fed Storm: Euro Zone Bonds Steady
Euro zone bond yields remained stable on Tuesday as markets await an interest rate decision from the U.S. Federal Reserve. German 10-year yields rose slightly, while traders speculate the European Central Bank may enact another rate cut in December. Economic sentiment in Germany shows signs of decreasing confidence.
- Country:
- United Kingdom
Euro zone bond yields held steady on Tuesday, a day before a significant interest rate decision from the U.S. Federal Reserve, which could strongly influence the European Central Bank's future monetary policy moves.
In early trading, German 10-year yields, a benchmark for the wider euro zone, rose by 1.6 basis points to 2.136%. The yield on the 10-year Bund has decreased by nearly 20 basis points since September began. Meanwhile, two-year Schatz yields saw a modest increase of 1 basis point, hitting 2.193%.
Traders speculate that the ECB, which recently cut rates, is more likely to introduce another 25-basis point cut in December rather than October. Similarly, U.S. markets suggest a near-70% probability that the Federal Reserve will implement a 50-basis point rate cut on Wednesday. Despite flat Italian 10-year yields at 3.48%, economic sentiment in Germany is expected to decline, with the ZEW index projected to fall to 17, its lowest reading since January.
(With inputs from agencies.)