Euro zone yield curves flatten, echoing moves in Britain

LONDON, Aug 7 (Reuters) - Euro zone yield curves flattened slightly on Thursday, with shorter dated yields rising a touch, and longer ones falling, though this was largely led by moves in Britain and the United States.

Germany's 10-year bond yield, the benchmark for the euro zone was last down marginally at 2.63%. DE10YT=RR

The action, such as it was, was away from the benchmark with Germany's 2-year yield up around 1 bp, and its 30-year yield down nearly 3 bps. DE2YT=RR, DE30YT=RR

The move is counter to the trend for much of the first half of the year when longer-dated yields rose more than shorter dated ones.

This 'steepening' in market parlance was due to Germany's massive spending boost, and worries about the long-term fiscal health of many countries driving moves in longer-dated bonds, while European Central Bank rate cuts kept two-year yields pinned down.

But with the ECB not expected to cut in the coming months, that is starting to shift. Germany's 10-year yield was last 70.9 bps higher than its 2-year, the least since late June. DE2DE10YT=RR

Investors see next to no chance of an ECB cut at next month's meeting, and are not fully pricing any further cut this cycle. 0#EURIRPR

Those moves in Europe on Thursday echoed those elsewhere.

Britain's rate sensitive two-year yield was around 5 basis points higher after the Bank of England cut interest rates but four of its nine policymakers - worried about high inflation - sought to keep borrowing costs on hold. GB2YT=RR

"With four dissenters, the future descent of UK interest rates remains in doubt," said Michael Metcalfe head of macro strategy at State Street markets.

Britain's 30-year yield fell slightly however. GB30YT=RR

Similarly, in the U.S. two-year Treasury yields were up 2 bps, with 10-year yields flat, and 30-year down 2 bps. US/

The focus there was on a Bloomberg News report that Federal Reserve Governor Christopher Waller is emerging as a top candidate to serve as the central bank's chair among President Donald Trump's team.

Back in Europe investors were also processing decent bond auctions from France and Spain, both of which saw strong demand.

French, Spanish and Italian bonds were all largely moving in line with the German benchmark, with 10 year yields near to flat on the day.

France's 10-year yield was 3.30%, Spain's was 3.21% and Italy's 3.48%. FR10YT=RR, IT10YT=RR, ES10YT=RR Two year yields for each country rose.

($1 = 0.8564 euros)