On November 12, euro zone government bond yields experienced a slight increase as investors anticipated insights regarding the European Central Bank's monetary easing strategy from forthcoming German economic data.
The ZEW Economic Research Institute is set to release figures on German investor sentiment later today. Following a drop in borrowing costs the previous day, concerns resurfaced regarding potential tariffs that could adversely impact the euro zone economy, linked to candidates in the U.S. administration of President-elect Donald Trump.
Germany's 2-year yield, sensitive to ECB interest rate expectations, rose by one basis point to 2.14%, recovering from a 5 basis points drop on Monday. Money markets are currently pricing in a deposit rate of approximately 1.9% for July, down from around 2% previously, with a full expectation of a 25 basis points rate cut in December and a 20% probability of a 50 basis points reduction.
The benchmark 10-year government bond yield for the euro area, based in Germany, increased by 0.5 basis points to 2.33%, following a 4 basis points decline earlier in the week. Meanwhile, the Italian 10-year government bond yield rose by 1.5 basis points to 3.61%. The spread between Italian and German 10-year yields, an indicator of the risk premium for holding Italian debt, currently stands at 126.5 basis points.