Euro zone yields retrace lower; focus on inflation picture
LONDON, Nov 19 (Reuters) -Euro zone government bond yields edged lower on Tuesday, retracing some of the previous day's rise that came on the back of a resumption of concern about inflation, particularly in light of higher oil and gas prices.
Growing investor unease over the escalating tensions between Russia and the West over the weekend pushed up the price of crude oil LCOc1 by more than 3% on Monday, while benchmark European natural gas prices TRNLTTFMc1 are at one-year highs.
Two top European Central Bank policymakers signalled on Monday they were more worried about the damage that expected new U.S. trade tariffs would do to economic growth in the euro zone than any impact on inflation.
But the bond market has latched onto the risk of a renewed pickup in price pressures.
A final reading of October harmonised inflation for the European Union later is unlikely to do much to shift expectations for another quarter-point rate cut from the ECB in December.
Right now, markets fully expect a 25-basis point drop in rates next month and are close to pricing in a 20% chance of a 50-bp cut EURESTECBM1X2=ICAP.
* German two-year yields DE2YT=RR were down 2 bps at 2.147%, having jumped 5 bps on Monday.
* Ten-year Bund yields DE10YT=RR were down 3 bps at 2.341%, leaving their premium over two-year yields at 19.3 bps.
* Italian 10-year yields IT10YT=RR were down 2.4 bps at 3.548%, while two-year yields IT2YT=RR were down 1.7 bps at 2.611%.
* Greek bonds GR10YT=RR outperformed the rest of the 10-year market, falling 5 bps to 3.198%, helped by Prime Minister Kyriakos Mitsotakis on Monday saying Athens will continue repayments of bailout loans ahead of schedule in 2025.
* On the macro front, later this week euro area negotiated wage figures are due on Wednesday and regional purchasing manager surveys (PMI) on Friday.
Reporting by Amanda Cooper; Editing by Andrew Heavens
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