Euro zone bond yields steady as global events in focus

By Sophie Kiderlin

LONDON, Feb 10 (Reuters) - Euro zone bond yields were broadly steady on Tuesday as investors weighed the potential impact of political shifts, including Japan's election and questions over UK Prime Minister Keir Starmer's future, on European debt markets.

The German 10-year yield, which serves as the benchmark for the euro zone, was last around one basis point lower at 2.8309%. DE10YT=RR

"Europe this week is really a spectator to more global events," said Kenneth Broux, head of corporate research, FX and rates, at Societe Generale.

"The curve is not really doing much in Europe at all. The front end really is anchored, risks are balanced, policy's appropriate, etc, etc," he noted.

The German 2-year yield was last little changed at 2.0568%.

Following Japan's election on Sunday, markets began the week working through the potential impact of the historic win for the Liberal Democratic Party, which increased the chances of Prime Minister Sanae Takaichi proceeding with stimulus measures. Japanese bond yields were last broadly steady.

Elsewhere, tensions over the UK's leadership eased on Tuesday following heavy criticism of Starmer due to his pick of Peter Mandelson as ambassador to the U.S. Mandelson was forced to resign over links to the late U.S. sex offender Jeffrey Epstein. UK assets came under pressure on Monday as uncertainty over Starmer's future grew, before he received some support from other senior party figures.

The yield on the British 10-year gilt was last down by 2 bps after having risen on Monday. GB10YT=RR

In a quiet data week in the euro zone, attention will also focus on U.S. economic data, including the January employment report, consumer inflation and retail sales figures. The data could shift market expectations for the Federal Reserve's interest rate policy.

Markets further contended with tech giant Alphabet tapping into the U.S. high-grade bond market on Monday, contributing to a surge of debt funding by AI companies. According to International Financing Review data, Alphabet sold $20 billion in a seven-part series of senior unsecured notes.

Besides the U.S. economic data, another key focus outside of the euro zone this week could be Norway, Broux said. Its inflation data came in hotter than expected on Tuesday, sending government debt yields higher .

Norway's 10-year yield hit its highest level since 2009, and was last up around 9 basis points to 4.309%. NO10YT=RR

Broux also noted that the data suggested the central bank would not be able to cut interest rates for now.

He said interest rates in developed markets, with a few exceptions, were generally "steady, stagnant and at neutral".

"And you're seeing a turn in the tide. I mean, Australia raised rates last week and Norway can't cut rates."