Euro zone bond yields nudge up, focus on central banks, Middle East
Aug 26 (Reuters) -Euro zone bond yields inched higher on Monday after a more cautious tone on monetary easing from the European Central Bank contrasted with expectations that the U.S. Federal Reserve will soon start cutting its own interest rates.
The German 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, rose 1.2 basis points to 2.24%. Germany's two-year bond yield DE2YT=RR was little changed at 2.37%.
Italy's 10-year yield IT10YT=RR was up 1 bp at 3.58%, and the gap between Italian and German bunds DE10IT10=RR stood at 133 bps.
Euro area government bond yields fell on Friday, tracking declines in U.S. Treasury yields, after Fed Chair Jerome Powell endorsed an imminent start to rate cuts, saying "the time has come for policy to adjust".
Traders are fully pricing in a 25 basis point (bps) rate cut from the Fed next month, with the odds of a super-sized 50 bps rate cut growing to 39% from 24% a week ago, market pricing showed.
ECB chief economist Philip Lane struck a more cautious note at the weekend over the situation in the euro zone, saying the central bank was making "good progress" in cutting inflation back to its 2% target but success is not yet assured.
Speaking at the Fed's annual economic symposium in Jackson Hole, Lane said on Saturday: "The monetary stance will have to remain in restrictive territory for as long as needed to shepherd the disinflation process toward a timely return to the target."
Traders are also keeping an eye on a fresh spike in tensions in the Middle East after Iran-backed Hezbollah launched hundreds of rockets and drones at Israel, in one of the biggest clashes in more than 10 months of border warfare.
Reporting by Sruthi Shankar in Bengaluru
Editing by Gareth Jones
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
