Euro zone 10-year bond yields hit multi-week lows, inflation data in focus

Long-dated euro zone government bond yields fell to their lowest level in weeks on Tuesday, as a strong Japanese auction lifted sentiment across big bond markets and attention turned to the release of May euro zone inflation data. Italian 10-year bond yields fell to three-month lows at around 3.48%, while French yields also fell to the lowest since early March, touching 3.15%.

The so-called "flash" estimate released later on Tuesday is expected to show that headline euro area inflation eased to 2%, the European Central Bank's target, from 2.2% in April. Euro zone bond yields were lower across the board ahead of the data, with benchmark 10-year German Bund yields falling to around 2.49% -- their lowest level since May 8.

It was last down around 3 basis points on the day, in line with a fall in French and Italian bond yields. "Today's HICP (euro zone) flash data should keep 10-year Bund yields above 2.5%," said Christoph Rieger, head of rates and credit research at Commerzbank.

Analysts said positive sentiment in European debt markets, where the fall in yields implied a rise in prices, was supported by a strong government bond auction in Japan. Recent tepid auction results for longer-dated debt in the United States and Japan have raised concerns about the ability of major economies to sell their bonds against a backdrop of concern about high debt levels.

But on Tuesday 10-year Japanese government bond (JGB) yields fell after results of an auction of the securities saw the highest demand since April last year.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)