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

By Sophie Kiderlin

LONDON, Feb 16 (Reuters) - Euro zone bond yields traded at their lowest level since early December on Monday, falling for a sixth trading day at the start of a week packed with key economic data.

On the U.S. Presidents Day holiday, German 10-year yields fell 1 basis point (bp) to 2.748%. It was the longest winning streak for the benchmark for the euro zone, 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 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," said Rainer Guntermann, rates strategist at Commerzbank.

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 it expects stronger data 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," Szczepaniak added.

Money market bets on an ECB rate cut by December eased slightly 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 2.0461%. DE2YT=TRR

Markets will also be watching out for key U.S. data, including the personal consumption expenditures price index due on 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 BoJ 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.