FX.co ★ Bund Yields Pares Gains on Softer US Inflation

Germany's 10-year Bund yield has stabilized around 2.82%, closely approaching a recent low of 2.792% recorded last week. This comes as US core inflation figures fell short of expectations, alleviating fears that persistent inflation could deter the Federal Reserve from implementing interest rate cuts later this year. In the European context, ECB member François Villeroy de Galhau emphasized on Tuesday that the notion of an ECB rate hike this year is "fanciful." Notably, the ECB maintained its policy rates in December while enhancing certain growth and inflation forecasts, solidifying market sentiment that rates are unlikely to change for some time. This is further supported by Eurostat's data indicating a reduction in eurozone inflation to 2.0% in December, aligning with the ECB's target. Investors are also attentive to revised hedging strategies from Dutch pension fund PFZW, which could mitigate immediate concerns about additional pressure on long-term government bonds associated with the transition of the Dutch pension system to a new framework.