Europe's Bond Jitters: Central Bank Decisions Loom

Euro zone government bond yields nudged higher on Tuesday, with investors holding back ahead of an expected Federal Reserve policy meeting. This meeting could significantly influence expectations regarding U.S. interest rates.

The markets are keenly observing forthcoming policy decisions from the Bank of England and the Bank of Japan, in addition to the U.S. Federal Open Market Committee's rate announcement on Wednesday. Germany's 10-year bond yield, a key euro zone benchmark, registered an increase of 1.5 basis points to reach 2.71%, as the ZEW economic research institute reported an unexpected rise in German investor morale for September.

Market anticipations now lean towards a 25-basis-point rate cut by the Fed, with reactions likely contingent on the central bank's communication and the updated rate projections. Meanwhile, U.S. Treasuries showcased minimal movement in London, with the 10-year yield standing firm at 4.03%, as investors awaited upcoming U.S. retail sales data.

(With inputs from agencies.)