Euro Zone Bond Yields Rise Amid Inflation and Trade Policy Concerns

Euro zone government bond yields increased slightly as investors await upcoming inflation data that may influence the European Central Bank's policy direction. Concerns over potential tariff hikes from the U.S. could further impact ECB strategies. Germany's bond yields and political tensions in France also add to the economic uncertainties.

On Tuesday, euro zone government bond yields saw a minor increase after hitting multi-week lows in the previous session. Investors are keenly awaiting inflation data later this week that could provide insight into the European Central Bank's potential policy moves.

Germany's 10-year bond yield, regarded as the benchmark for the euro zone, rose by 1 basis point to stand at 2.218%, following a dip to a four-week low on Monday. This comes as the economic sentiment in Germany's export sector showed slight improvement amid anticipation of further details on trade policies from U.S. President-elect Donald Trump.

Trump's proposed tariff hikes on imports have unsettled European economic circles, especially since euro zone data is currently showing signs of deterioration. The ECB is considering its policy stance, as maintaining tight monetary policy could risk dropping inflation below the targeted 2%, a point underscored by ECB's chief economist Philip Lane.

(With inputs from agencies.)