Euro zone yields steady as global data paints mixed picture
By Lucy Raitano and Samuel Indyk
LONDON, Dec 16 (Reuters) - Euro zone government bond yields were little changed on Tuesday as traders weighed weaker-than-expected business activity data from the bloc against a mixed U.S. jobs report for clues on the outlook for monetary policy.
A survey showed euro zone business activity growth slowed more than expected at the end of 2025 as a contraction in manufacturing deepened and expansion in the dominant services sector eased.
Tuesday's delayed U.S. labour market report painted a mixed picture: job growth rebounded last month but the unemployment rate rose to 4.6%, its highest in more than four years.
Euro zone yields held steady after the U.S. figures, remaining within recent ranges. Germany's 10-year yield DE10YT=RR, the euro zone benchmark, was little changed at 2.848%, after touching 2.894% last week, its highest since mid-March.
The yield on Germany's two-year Schatz DE2YT=RR was down about 1.5 basis points at 2.138%.
"The labor market remains weak, but the pace of deterioration probably is too slow to spur the FOMC to ease again in January," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
The Federal Reserve cut rates last week, but policymakers appeared sharply divided and signalled borrowing costs were unlikely to fall further in the near term as they await more data.
The European Central Bank, which announces its latest policy decision on Thursday, is expected to keep its deposit rate on hold for some time, with the next move more likely to be a hike than a cut.
Markets are pricing in around 7 bps of tightening by December 2026, implying about a 30% chance of a hike by the end of next year.
The Bank of England and Bank of Japan are also set to deliver rate decisions later this week.
Elsewhere, the yield on France's 10-year OAT FR10YT=RR dropped 1 bp to 3.555%, keeping the gap against Bunds steady at about 70 bps DE10FR10=RR.
On Monday, French senators approved the 2026 budget bill, setting the stage for lawmakers to hammer out a final compromise text before a crucial vote on December 23.
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