Euro zone bond yields slightly lower; inflation, rate outlook in focus

Euro zone government bond yields edged lower on Wednesday, according to Business Recorder, as the market steadied following a spell of sharp swings. Traders are waiting on American price figures scheduled for later today, hoping they will shed light on the Federal Reserve's likely rate path. Economists anticipate that annual headline inflation climbed to 3.6% in September, mainly because energy costs rebounded.

Germany's 10-year yield, the regional benchmark, slipped by less than one basis point to 3.4589%. Germany's two-year yield, more sensitive to rate expectations, slid roughly 2 basis points, landing at 3.1036%. Bonds have been steadying in recent days, yet traders remain nervous after a worldwide selloff spanning late September into early October.

ECB President Christine Lagarde, speaking during a CNN gathering in Bangkok, said euro zone inflation owed its current level mostly, though not wholly, to an energy price surge tied to the US-Israeli war on Iran. Lagarde also noted that second-round price effects had not yet shown up, but the ECB will track wage negotiations for signals. The ECB has lifted rates twice this year, each time by 25 basis points, and money markets were last almost fully pricing in one more hike by December.