Euro zone yields fall after U.S. inflation slows

BY Reuters | ECONOMIC | 06/12/24 08:40 AM EDT

(Updates at 1235 GMT after U.S. CPI)

June 12 (Reuters) - Euro zone yields dropped after cooler than expected U.S. inflation caused markets to increase bets the Federal Reserve could cut interest rates as soon as September.

U.S. consumer prices

were unexpectedly unchanged in May month on month, and 3.3% year on year, both below analysts' expectations, causing markets to price roughly a 70% chance of a Fed rate cut by September.

Germany's 10-year government bond yield, the benchmark for the euro area, was last down 8 basis points at 2.54%, having been down 2.4 bps before the data.

Italy's 10 year yield dropped 12 basis points to 3.94% (Reporting by Stefano Rebaudo and Alun John, editing by Kim Coghill and Andrew Heavens)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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