Euro zone yields slip after Fed signals rates higher for longer

LONDON: Euro zone bond yields edged lower on Thursday after the US Federal Reserve held interest rates steady and signalled it might have to leave rates elevated for longer than previously expected.

Fed Chair Jerome Powell told reporters that inflation was too high and progress in bringing it down was uncertain.

He set the stage for a potentially extended hold of the benchmark policy rate in the 5.25%-5.50% range that has been in place since July.

German 10-year bond yield, the benchmark for the euro zone, fell 2.7 basis points (bps) to 2.55%.

Euro zone government bonds steady ahead of inflation data

The two-year bond yield, which is more sensitive to European Central Bank rate expectations, was down 2.9 bps at 2.99%.

Italy’s 10-year yield was lower by 4 basis points at 3.87%, and the gap between Italian and German bunds widened 2 basis points to 131 bps.

The spread between US 10-year Treasuries and German bunds widened 0.3 basis points to 205 bps.