Euro Zone Bond Yields Slip as Markets Eye U.S. Economic Data for Direction

As traders keenly await critical U.S. economic data, euro zone bond yields saw a slight decrease on Thursday. Germany's 10-year yield, often considered the euro area's benchmark, dropped by 2 basis points to 2.674%, indicating cautious investor sentiment. This decline comes amidst fading optimism over easing trade tensions.

The market is meanwhile speculating on a possible 25 basis point interest rate cut at the European Central Bank's upcoming June meeting. German 2-year yields, more responsive to monetary policy shifts, decreased by 3 basis points, and Italy's 10-year yield also fell slightly. According to Mohit Kumar from Jefferies, external factors, particularly U.S. policies, continue to drive these trends more than domestic issues.

Attention now shifts to the release of crucial U.S. data, including April's retail sales and jobless statistics, which could further illuminate the U.S. economic climate. Investors remain wary of potential inflationary pressures driven by U.S. tariffs, contributing to fears of a global recession. Meanwhile, Europe's economic performance shows mixed signals, with Italy's bond spread against Germany reflecting persisting risk perceptions.

(With inputs from agencies.)