European government bond yields in the euro area edged up on Thursday as the European Central Bank prepared to debate whether to end its unprecedented stimulus scheme this year. On Wednesday the US Federal Reserve raised interest rates as expected, and signalled two more hikes this year, citing higher inflation.
Two-year US Treasury yields touched their highest in nearly a decade and 10-year bond yields hit 3-week peaks after the Fed move, narrowing the gap between the two to the tightest since at least March 2010. But there was little follow-through from the US sell-off in Europe as US bonds recovered quickly and many investors moved to the sidelines ahead of the ECB meeting. The ECB is widely expected to wind down its 2.55 trillion euro stimulus scheme later this year and a shift in policy later in the day is anticipated following hawkish comments from some top ECB officials last week.
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