Euro‑zone Yields Steady Amid Inflation and ECB Outlook

Euro‑zone government bond yields were mostly steady to slightly lower as investors tracked U.S. Treasuries and the risk of a U.S. government shutdown; German 10‑year Bunds traded in the low‑ to high‑2% area while U.S. 10‑year yields were near 4.14%–4.15%. Markets are focused on September euro‑area HICP/CPI releases, which are expected to show headline inflation around 2.2%–2.3% and core inflation roughly 2.3%, with Germany showing stickier food and services pressures. That backdrop supports expectations the European Central Bank will keep policy rates near current levels into 2026/early‑2027, and traders assign only a modest (about 30%–35%) chance of a 25 basis‑point cut by mid‑2026/July 2026. Analysts warn a prolonged U.S. government shutdown or delayed data releases could inject additional market caution despite historically temporary effects. Spanish bonds have benefited from recent sovereign rating upgrades and central European currencies such as the Hungarian forint and Czech crown have held up, and separately India’s Monetary Policy Committee kept the RBI policy repo rate at 5.5%, describing the stance as growth‑centric and welcoming measures to ease credit supply for large borrowers.