Euro zone bonds seek direction as markets scale back ECB hike bets
The U.S. 10-year Treasury yield rallied after data showed the world's largest economy created more jobs than expected in August; but unemployment rose and wage inflation declined slightly, affirming expectations the Fed will pause rate hikes later this month.
Germany's 10-year government bond yield, the benchmark for the euro area, rose 6.1 basis points (bps) to 2.53% after the U.S.
data, having falling 6.5 bps the day before. It is set for a weekly decline.
The policy-sensitive 2-year German yield flattened at 2.98%, after hitting a one-week low on the U.S.
job data.
«U.S. jobs report strengthens the case for the Federal Reserve putting a pause or even an end to its interest rates hiking campaign,» said Brewin Dolphin, wealth manager at RBC.
In the meantime, money markets scaled back their bets on a European Central Bank September rate hike and are pricing an around 20% chance of a 25-bps ECB hike this month after data showed inflation in the euro zone unexpectedly held steady in August, from 60% expected on Wednesday.
Investors were also assessing a less hawkish stance by ECB policymaker Isabel Schnabel.
«Schnabel's decision to sit on the fence for September feels significant given her last speech in June called for erring on the side of doing too much,» Citi analysts said in a note.
«The speech argued for a genuine meeting-by-meeting approach amidst the uncertainty,» they added.
Economists at Nomura said that before the ECB meeting on Sept.
