Cooler-than-expected US CPI pushes euro zone bond yields lower

Credit: REUTERS/DADO RUVIC

By Stefano Rebaudo and Samuel Indyk

Nov 14 (Reuters) – Yields on euro zone government bonds and U.S. Treasuries fell on Tuesday after cooler-than-forecast U.S. inflation data cemented expectations that the Federal Reserve was probably finished with rate hikes.

U.S. consumer prices were unchanged in October, the Labor Department’s Bureau of Labor Statistics said, while in the 12 months through October, the consumer price index climbed 3.2%, down from a 3.7% rise in the 12 months through September.

“This should reaffirm the Fed’s view that interest rates are restrictive enough to bring inflation back to target,” said Richard Garland, chief investment strategist at Omnis Investments.

“Although a comforting inflation reading is still some distance away, the labour market is weakening and economic growth is set to slow as consumers reign in their spending; a soft landing for the economy still looks most likely.”

Euro zone yields tracked U.S. counterparts, with Germany’s 10-year government bond yield DE10YT=RR, the benchmark for the euro area, 7.5 bps lower at 2.641%.

The policy-sensitive two-year yield DE2YT=RR fell 5.5 bps to 3.112%.

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