Euro Zone Bonds Rally on Hopes of ECB Rate Cut
Euro zone government bond yields fell on Tuesday, fueled by slowing inflation and expectations of an ECB rate cut. German yields dipped to levels last seen in May, while Italian and French yields hit three-month lows. Strong Japanese auction results further boosted sentiment in global bond markets.
On Tuesday, euro zone government bond yields experienced a significant decline, driven by a slowdown in regional inflation and hopes of a European Central Bank (ECB) rate cut. Germany's 10-year bond yields fell to their lowest point since May, down by 2 basis points to 2.503%. Italian and French yields also dropped, reaching three-month lows.
The latest data indicated consumer price inflation across the euro zone's 20 member countries slowed to 1.9% in May from 2.2% the previous month, dipping below the ECB's 2% target. This downturn in inflation has strengthened market expectations for a rate cut at the ECB meeting on Thursday.
Meanwhile, bond markets in Europe received an additional boost from a strong Japanese bond auction, providing relief amid concerns over long-term debt issuance. Analysts suggest this positive sentiment might alleviate some supply-side fears in major economies. The U.S. Treasuries were similarly buoyant, with yields falling 2 bps.
(With inputs from agencies.)
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