Euro zone government bond yields ease slightly after US data

Oct 24 (Reuters) - Euro zone government bond yields briefly ticked down after economic data showed U.S. consumer prices increased slightly less than expected in September.

The U.S. economic figures kept the Federal Reserve on track to cut interest rates again next week and affected marginally bets on the European Central Bank rate outlook.

Euro area government bond yields rose on Friday after stronger-than-expected Purchasing Managers’ Index readings from the single-currency bloc prompted investors to slightly scale back bets on a European Central Bank rate cut next year.

Germany’s 10-year Bund yields were last up 3 basis points (bps) at 2.61%.

Money markets priced in a 55% chance of a 25 bp ECB rate cut by July EURESTECBM7X8=ICAP from 50% before the U.S. data. The key rate is seen at about 1.85% in December 2026 from the current 2% EURESTECBM10X11=ICAP.

Germany’s 2-year yields DE2YT=RR, more sensitive to ECB policy expectations, were 3 bps higher at 1.96%, after hitting a 2-week high of 1.98%.

Borrowing costs on both sides of the Atlantic rose on Thursday after U.S. sanctions on Russia prompted a jump in oil prices, stoking inflation concerns.

Benchmark U.S. Treasury 10-year yields US10YT=RR dropped 1.5 bps to 3.97%, after rising 3.5 bps the day before.