German 10-year yield falls for sixth consecutive day; economic data in focus

By Sophie Kiderlin

LONDON, Feb 16 (Reuters) - Euro zone bond yields traded at their lowest level since early December on Monday, down for a sixth trading day as the market kicked off a week packed with key economic data, on the U.S. Presidents' Day holiday.

German 10-year yields, the benchmark for the euro zone, inched lower to 2.7539%, levels last seen in early December as yields eased for the sixth trading day in a row. It was the longest winning streak for the German 10-year bond since late November 2024. Bond yields move inversely to prices. DE10YT=RR

Last week, German 10-year yields fell around 9 basis points, their biggest weekly decline since March.

The week ahead is set for a calm start with market holidays in various regions, including the U.S. and parts of Asia. Several key data points are nonetheless expected later in the week, which traders will be watching closely as they could affect expectations for European Central Bank monetary policy.

"Bunds may take a breather amid stabilising risk sentiment and the U.S. holiday, but the constructive duration backdrop is likely to extend ahead of the data reality check on Friday," Rainer Guntermann, rates strategist at Commerzbank, said in a note.

Friday's data releases will include surveys of business activity in Germany and France. Before then, markets will be watching out for economic sentiment in Germany.

Andrzej Szczepaniak, senior European economist at Nomura, said the bank expected stronger data across the board than the consensus forecast.

"Markets currently price around 8 bp of cuts by Dec 2026, but if the data comes in stronger, as we expect, we should see 2-3 bp of cuts come out."

Money market bets on an ECB rate cut by December eased slightly on Monday after having risen to a roughly 40% probability after Friday's U.S. inflation data. German two-year yields, which are sensitive to interest rate expectations, were last little changed at 2.0496%. DE2YT=TRR

Markets will also be watching out for key U.S. data, including the personal consumption expenditures price index due Friday. The inflation gauge is widely seen as crucial to the Federal Reserve's decision making.

Elsewhere, weaker-than-expected Japanese economic data saw traders temper bets for an early interest rate hike from the Bank of Japan. Prime Minister Sanae Takaichi and Bank of Japan Governor Kazuo Ueda met on Monday for the first time since the ruling party's landslide election win this month.

After the meeting , Ueda said Takaichi had not made any specific monetary policy requests.