Euro Zone Bond Yields Show Subtle Decline as Market Awaits Key Data

Euro zone bond yields edged lower on Tuesday, with the difference between Italian, German, and French yields settling close to their narrowest in years. Business activity figures are the only scheduled data, with Germany's 10-year yield, a key euro zone benchmark, dropping 2 basis points to 2.61%, marking its lowest in almost two weeks following a near 5-basis-point decline on Monday.

Italy's 10-year yield reduced by 3 basis points to 3.44% after a 7-basis-point drop on Monday, bringing the difference from the German yield to 83 basis points, one of the tightest gaps since 2010. This narrowing spread reflects Italy's strong economic performance and overall market optimism in recent years.

The Italian-French yield spread, influenced by political and fiscal uncertainty in France, stands at about 17 basis points, its closest since 2007. Meanwhile, investors await business activity data from Europe and the U.S., with the latter expected to have more market influence, especially in light of recent soft U.S. job numbers as the Federal Reserve's interest rate decisions loom.

(With inputs from agencies.)