LONDON: Euro zone government bond yields held broadly steady today as investors waited for the US Federal Reserve (Fed)’s decision on interest rates later in the week.
However, the risk premium investors attach to French government debt rose to its highest in a week after credit ratings agency Moody’s unexpectedly downgraded France’s rating on Friday.
Germany’s 10-year bond yield, the benchmark for the euro zone bloc, was flat at 2.25%.
The yield on France’s 10-year bond rose 2 basis points (bps) to 3.051%.
That pushed the gap between French and German yields – seen as a gauge of the extra return investors demand to hold France’s debt – to 80 bps, its highest since Dec 5.
The main event of the week is Wednesday’s US interest rate decision, with the Fed expected to lower rates by 25 bps.
The size and importance of the US economy means Fed decisions often move global financial markets.
Survey-based data on the health of the euro zone’s economies could also impact markets today.
Italy’s 10-year yield was 1 bp higher at 3.39%, and the gap between Italian and German yields stood at 114 bps.
Germany’s two-year bond yield, which is more sensitive to European Central Bank (ECB) rate expectations, slipped 1 bp to 2.045%.
