Euro zone government bond yields mixed before Fed policy meeting

By Stefano Rebaudo

Dec 9 (Reuters) - Euro zone government bond yields were little changed on Tuesday as investors took a breather after pricing out a European Central Bank rate cut for 2026 on Monday. A batch of strong economic data and comments from ECB policymaker Isabel Schnabel, who said a rate hike is more likely than a cut, had pushed 10-year euro zone borrowing costs to fresh multi-month highs on Monday.

That day, German 30-year yields had hit their highest levels in more than 14 years, as long-dated debt came under global pressure on worries over rising fiscal spending and heavier bond supply.

On Tuesday, Germany's 10-year yields, the euro area's benchmark, were down 0.5 basis points (bps) at 2.86%. They hit 2.876% on Monday, their highest since mid-March.

Benchmark 10-year U.S. Treasuries yields were flat at 4.17% after rising 3.5 bps on Monday.

Investors will closely watch data from the U.S. Job Openings and Labor Turnover Survey (JOLTS) due later in the session.

They also expect the Federal Reserve to deliver a 25-basis-point rate cut when its policy meeting concludes on Wednesday, but the focus will be on any signals about the path ahead, with traders currently pricing in three more cuts by the end of 2026.

Germany's 30-year yields, more sensitive to long-term fiscal concerns, fell 0.5 bps to 3.47%, after hitting 3.478% on Monday, the highest since summer 2011. Yields on German 2-year Schatz rose 0.5 bps to 2.17%.

Markets priced in an around 5% chance of an ECB rate cut next summer from zero chance the day before.

(reporting by Stefano Rebaudo; editing by Andrew Heavens)