Eurozone bond yields fell on Wednesday on bets that weak data from the United States has put pressure on the European Central Bank to announce further policy easing measures. The ECB meets on Thursday. On Tuesday, data showed that the US service sector expanded more slowly in August than in July, with the fall the largest since the 2008 financial crisis.
This, on the back of Friday's weak jobs numbers, pushed back expectations for a US rate hike. "With a September rate hike looking less likely to happen, the ECB might be more pressured to come up with a decision this week on further measures," said Benjamin Schroeder, senior rates strategist at ING.
The fall came even as the German debt management office sold 3.5 billion euros of new 10-year Bunds with a yield of minus 0.11 percent, a record low at auction. Germany's longer-dated bonds proved even more popular on the day, with 30-year Bund yields briefly falling as much as 5 bps to just below 0.4 percent. Spanish bond yields edged lower, extending Tuesday's fall when the 10-year bond recorded its biggest daily tumble since the start of July. That fall came despite the fact that political deadlock in the country looks likely to drag on after acting prime minister Mariano Rajoy last week failed to win parliamentary approval for the formation of a government.