Euro zone bond yields drop, focus on next week's US inflation data

BY Reuters | ECONOMIC | 05/10/24 03:09 AM EDT

May 10 (Reuters) - Euro zone bond yields edged lower on Friday catching up with a fall in U.S. Treasuries late on Thursday, while investors' focus shifted to next week's U.S. inflation data for clues on the Federal Reserve's policy path.

The outcome of the Bank of England policy meeting and U.S. data on Thursday failed to affect market expectations for the central banks' easing cycle.

Germany's 10-year government bond yields, the bloc's benchmark, dropped 2.5 basis points (bps) to 2.47%.

Markets are pricing in 70 basis points (bps) of ECB rate cuts in 2024, and 45 bps for the Fed .

Italy's 10-year yield fell 4.5 bps to 3.79%, and the yield gap between Italian and German bonds - a gauge of the risk premium investors seek to hold bonds of the euro area's most indebted countries - was at 131 bps.

Germany's 2-year yield, more sensitive to policy rate expectations, was flat at 2.94%.

(Reporting by Stefano Rebaudo; Editing by Sonali Paul)

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