Euro area yields pare rise as US data increases chances of Fed cutting by 25 bps next month

By Stefano Rebaudo

Nov 13 (Reuters) - Euro zone yields pared their rise on Wednesday after data showed U.S. inflation increased as expected in October, supporting expectations for a Federal Reserve rate cut next month.

The U.S. consumer price index rose 0.2% for the fourth straight month, the Labor Department's Bureau of Labor Statistics said on Wednesday. In the 12 months through October, the CPI advanced 2.6% after climbing 2.4% in September.

Markets priced in an around 80% chance of a 25 basis points (bps) Fed cut in December, from 60% before data.

They also discounted an European Central Bank depo rate at 1.9% in July, from 1.96% before data.

Analysts recalled Minneapolis Fed's Neel Kashkari - seen as one of the more hawkish voices -- suggested on Tuesday a reasonably high bar for the Fed to pause in cutting rates, saying there'd have to be a surprise on the inflation front.

Germany's 2-year government bond yield, which is more sensitive to expectations for ECB rates, rose 2 basis points (bps) to 2.15%. It was up 6 bps before data.

Investors recently balanced rising U.S. rates on the so-called Trump trade against a weak European economic outlook, which supports expectations for future ECB rate cuts.

Germany's 10-year yield, the benchmark for the euro area, was up 1.5 bps at 2.36%. It was up 5 bps earlier. (Reporting by Stefano Rebaudo, editing by)