Euro Zone Bond Yields Dip Amid U.S. Shutdown & Inflation Data

On Wednesday, euro zone government bond yields saw a minor decline, echoing the performance of U.S. Treasuries, impacted by the onset of a U.S. government shutdown. New inflation data has fortified expectations that the European Central Bank (ECB) will maintain steady interest rates for the foreseeable future.

The U.S. shutdown commenced after the Senate failed to pass a short-term spending bill. In response, Germany's 10-year Bund yield dropped by 0.4 basis points to 2.71%, and U.S. Treasury 10-year yields decreased by 2.3 basis points to 4.12%. The prolonged shutdown and its potential economic repercussions remain key considerations for investors.

Market analysts predict no ECB rate cuts until at least July 2026, amid global geopolitical uncertainties. The yield differential between Bunds and French government bonds remains high, amplified by fiscal goals announced by France's new Prime Minister, Sebastien Lecornu, intending to address a budget deficit by 2026.

(With inputs from agencies.)