European bond yields inch higher as metals rout roils markets

(Adds quotes, updates prices throughout)

By Sophie Kiderlin

LONDON, Feb 2 (Reuters) - Safe-haven euro zone government bond yields edged higher on Monday as a rout in precious metals gripped markets to start off a week that will also see a European Central Bank interest rate decision.

Silver and gold

extended

last week's declines early on ?Monday before paring back some losses.

CME Group raised margin requirements on various futures contracts, including on gold and silver, which ?contributed to the sharp selloff in metals that began at the tail-end of ?last week after U.S. President Donald Trump nominated Kevin Warsh to be ?the next Federal Reserve ?Chair.

However government bonds, which are generally regarded as safe-haven assets, appeared largely unscathed.

German 10-year yields, the euro zone's ?benchmark, were last around one basis point higher ?at 2.8531%, while two-year yields, which are more sensitive to rate expectations, were up by over 1 bp to 2.0811%.

Investors also looked to the ?ECB's meeting later this week. While Europe's ?central bank ?is widely expected to keep interest rates unchanged, markets will be watching closely for signs as to how the euro's recent strength could affect policy-making going forward.

Concerns that ?a stronger euro could amplify deflationary pressures and prompt the ECB to cut interest rates further emerged last week, pushing German two-year yields to their biggest monthly drop since April 2025.

The ECB is however unlikely to highlight the euro's strength as a key concern at this week's meeting, said Claus Vistesen, chief euro zone economist at Pantheon ?Macroeconomics.

"For them ?to really start voicing concerns about the euro as a general rule, the euro has to appreciate by between 5% and 10% between meetings, and ?in particular between forecasts," he said, noting that this threshold has not been reached.

Much of the chatter about the euro's strength and how it would impact interest rates was linked to some ECB policymakers previously pointing to $1.20 as a key level for euro-dollar, Vistesen explained. He said this prompted markets to ask questions when this level was hit even though it might not actually be that ?important for the central bank.

Before the central bank meeting, inflation data for various euro zone economies, and the bloc itself, is expected. Data out of Germany on Friday showed inflation in Europe's largest economy picked up ?slightly in January.

(Reporting by Sophie Kiderlin; editing by Amanda Cooper, Sharon Singleton and Mark Heinrich)