FRANKFURT, May 3 ― Euro zone yields dropped today ahead of US jobs data and were headed for a weekly fall after Federal Reserve Chair Jerome Powell suggested rate cuts remained on the table, soothing fears of a possible hike by the US central bank.
Money markets are pricing in 70 basis points (bps) of European Central Bank monetary easing in 2024, and 39 bps for the Fed.
Germany's 10-year bond yield, the benchmark for the euro zone, fell 2.5 bps to 2.53 per cent and was set to end the week 5 bps lower.
The yield spread between US 10-year Treasuries and German bunds ― a gauge of the expected policy path divergence between the ECB and the Fed ― was flat at 205 bps.
The German two-year bond yield, more sensitive to expectations for ECB policy rates, was down 2 bps at 2.97 per cent.
Italy's 10-year yield was 3 bps lower at 3.84 per cent.
The gap between Italian and German 10-year yields ― a gauge of the risk premium investors ask to hold bonds of the euro area’s most indebted countries ― tightened by 1 bp to 131 bps. ― Reuters