Steady Eurozone Bond Yields Amid Fiscal Shifts and Inflation Insights
Eurozone bond yields remained steady as inflation in Germany and Italy eased, leading to increased bets on European Central Bank rate cuts. German fiscal spending boosts investment, while U.S. fiscal policy and trade talks influence global markets. Expect tighter eurozone bond spreads against German Bunds by year's end.
Eurozone government bond yields remained stable on Monday, reflecting a modest increase in investor bets on European Central Bank (ECB) rate cuts triggered by Germany's benign inflation data. Inflation in Germany, the eurozone's largest economy, eased to 2% year-on-year in June, defying analyst expectations of a rise to 2.2%.
Italy's EU-harmonised consumer price readings also dipped below median forecasts, with Berenberg economist Salomon Fiedler affirming the benign inflation environment, allowing the ECB to maintain its deposit rate at 2.0% barring any shocks. Germany's 10-year yield, the euro area's benchmark, was nearly unchanged at 2.595%.
Fiscal policies remain a focal point with German lawmakers approving a multi-billion-euro package to stimulate investment. Meanwhile, the U.S. fiscal landscape is influenced by Senate efforts to advance new tax-cut legislation and trade discussions with Canada around digital service taxes.
(With inputs from agencies.)
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