Germany's Bund yield eases as markets digest U.S. inflation data
LONDON, Aug 12 (Reuters) - Euro zone government bond yields edged lower on Thursday as markets continued to digest an easing of inflationary pressures in the United States, with Germany's benchmark Bund yield retreating further from a two-week high.
Increases in U.S. consumer prices slowed in July, CPI data on Wednesday showed, taking some heat out of speculation over when the Federal Reserve might taper its bond buying.
Treasury yields fell across the curve after the data, narrowing the gap between U.S. and German 10-year yields, which had hit its widest in two months earlier on Wednesday at 181.92 basis points.
Germany's 10-year yield was down by half a basis point at -0.465% in early European trading on Thursday, but with a substantial reversal in the Treasury moves, the spread had narrowed back to 180.48 bps by 0726 GMT.
The closely-watched gap between Italian and German 10-year yields was at 102.04 bps, having briefly narrowed below 100 bps for the first time in a month on Wednesday..
"With the data/supply calendar cooling down markets should remain in consolidation mode. We recommend buying dips," Commerzbank rates strategists wrote in a note to clients.
U.S. yields were pushed higher earlier in the week by comments from Federal Reserve officials suggesting that the central bank could soon reduce its asset purchases.
Euro area bonds have been supported in recent weeks by diverging expectations for European Central Bank and Fed policy, with the ECB expected to keep rates lower for longer.
A gauge of long-term euro zone inflation expectations - the five-year, five-year inflation forward - rose to 1.7091%, its highest since late 2018.
Euro area industrial production data is due at 0900 GMT, as well as U.S. producer-price inflation data (PPI) and jobless claims later in the session. (Reporting by Elizabeth Howcroft; Editing by Kirsten Donovan)
