Bund yields set for steep weekly decline before US data, tariff ruling

By Stefano Rebaudo

Jan 8 (Reuters) - Euro area benchmark Bund yields were on track for their steepest weekly decline in months, after pulling back from near nine-month highs following weak economic data.

Investors are expected to stay on the sidelines ahead of key U.S. economic data later in the day and a Supreme Court decision on whether former President Donald Trump’s sweeping tariffs were lawful.

Data showed earlier this week December inflation slowed more than expected in Germany and reached 2% in the euro area.

HCOB's final composite Purchasing Managers' Index for the bloc confirmed the euro zone economy expanded at a slower pace last month.

Germany’s 10-year yields DE10YT=RR, the euro area’s benchmark, were up 0.5 basis points (bps) at 2.84% and set for a weekly drop of 6.5 bps, the biggest since early October.

They climbed to 2.917% before Christmas, just a couple of bps shy of March highs, when Germany struck a political deal to increase infrastructure and defence spending.

German 30-year yields DE30YT=RR were flat at 3.48%. They reached 3.556% last year, their highest level since July 2011, as long-dated debt came under pressure on expectations of heavier bond supply.

German 2-year yields DE2YT=RR, more sensitive to expectations for policy rates, rose one basis point to 2.11%.

Italy’s 10-year government bond yields IT10YT=RR were up 0.5 bps at 3.48%, with the gap against Bunds at 64 bps after reaching 60 bps last week, its lowest since September 2008.