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Euro zone bond yields jump after Fed decision

BY Reuters | ECONOMIC | 12/19/24 02:50 AM EST

Dec 19 (Reuters) - Euro zone bond yields jumped on Thursday, a day after the U.S. Federal Reserve cut interest rates as expected but signalled it would slow the pace of easing in 2025.

Germany's 10-year bond yield, the benchmark for the euro zone bloc, rose 6 basis points (bps) to 2.297%, touching its highest level since Nov. 22. Yields move inversely to prices.

Italy's 10-year yield was up 9 bps to 3.489%, and the gap between Italian and German bond yields widened 5 basis points to 118 bps.

The U.S. central bank cut interest rates by 25 bps as expected on Wednesday, but Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering inflation. (Reporting by Greta Rosen Fondahn Editing by Peter Graff)

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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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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