Euro zone government bond yields held largely steady on Tuesday, as markets readied for the US Federal Reserve meeting on Wednesday, where the central bank is expected to cut interest rates but signal a measured pace of easing ahead.
Germany’s 10-year bond yield, the benchmark for the euro zone bloc, was up less than 1 basis point (bp) at 2.25%.
Italy’s 10-year yield was up 2 bps at 3.416%, its highest level since Nov. 27, while the gap between Italian and German bond yields held steady at 115.7 bps.
Germany’s two-year bond yield, which is sensitive to European Central Bank rate expectations, was little changed at 2.05%.
Traders price in a 25-basis-point cut from the Fed on Wednesday, but then expect the central bank to signal a slower pace for cuts in 2025.
Euro zone government bond yields steady but French risk premium rises
The gap between French and German yields - seen as a gauge of the extra return investors demand to hold France’s debt - was little changed at 80.2 bps.
The spread reached its widest in around two weeks on Monday, after credit ratings agency Moody’s unexpectedly downgraded France’s rating on Friday.
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