Euro zone government bond yields edged down on Monday as investors awaited inflation data from German states and Italy later in the session.
German data showed that retail sales and import prices fell short of expectations in May.
Trade talks are also in the spotlight after Canada scrapped its digital services tax targeting US technology firms in a bid to advance stalled trade negotiations with the United States.
Meanwhile, Fed Chair Jerome Powell will have an opportunity to repeat his cautious outlook when he joins several other central bank chiefs at the European Central Bank forum in Sintra on Tuesday.
The prospect of an eventual policy easing has helped Treasuries weather worries about the US budget deficit and the huge amount of borrowing it entails.
Yields on 10-year Treasuries were steady at 3.28 percent, having fallen 9 basis points last week. — Reuters
The yield on Germany’s 10-year bond, the euro area’s benchmark, fell 1.5 basis points (bps) to 2.58 percent, after hitting 2.605 percent on Friday, its highest level since May 26.
The 30-year yield was down 0.5 bps at 3.09 percent, while the yield on the 2-year – more sensitive to expectations for European Central Bank policy rates – dropped one bp to 1.85 percent.
The German yield curve steepened last week, with the spread between 10-year and 2-year yields recording the first weekly rise in a month.
Markets have priced in an ECB terminal rate roughly unchanged at around 1.75–1.80 percent, while yields on longer maturities rose on expectations of a significant increase in German fiscal spending.
Italy’s 10-year government bond yield fell 1.5 bps to 3.50 percent, with the spread between BTPs and Bund yields at 90.5 bps. The gap hit 84.20 bps earlier this month, its lowest level since March 2015.
