Euro zone yields steady as Israel-Iran ceasefire douses inflation concerns

LONDON, June 24 (Reuters) - Euro zone government bonds traded steadily on Tuesday, after U.S. President Donald Trump said a ceasefire between Israel and Iran was now in place, raising hopes of an end to the 12-day war even as deadly attacks were reported in both countries.

Closer to home for European investors was an array of European Central Bank speakers, including President Christine Lagarde and chief economist Philip Lane later on.

With the ceasefire announcement, oil prices dropped sharply, bringing losses over the past week to around 10%, which helped soothe investor concerns about a potential energy price shock compounding economic uncertainty linked to Trump's tariffs.

German 10-year yields DE10YT=RR were little changed on the day, up less than 1 basis point at 2.52%, while two-year Schatz yields DE2YT=RR held at 1.838%.

On the supply front, the German debt agency will announce its issuance plans for the third quarter of the year.

The German government is expected to approve the draft budget for 2025 and the budget framework for 2026 on Tuesday with record investments of 115.7 billion euros in 2025 and 123.6 billion euros in 2026, up from 74.5 billion euros in 2024.

Monday's survey of business activity across the euro zone showed the regional economy flat-lined for a second month in June, as the dominant services sector showed only small signs of improvement and manufacturing, none at all.

For now, traders expect the ECB to deliver one more rate cut this year as inflation is nearing the central bank's target. Tuesday's drop in the oil price helped preserve those expectations.

"Until the data turns into a material deterioration, we see no reason for markets to deviate from the expected European Central Bank landing zone of 1.75%," ING strategists Michiel Tukker and Benjamin Schroeder said in a note.

Meanwhile, Italian 10-year BTP yields IT10YT=RR eased 2 bps to 3.482%, leaving the premium over Bunds at 97.05 bps DE10IT10=RR.

Next up is a measure of German business morale from the Ifo institute.