June 11 (Reuters) - Euro zone bond yields rose slightly on
Thursday, but remained lower on the day, after European Central
Bank policymakers raised interest rates and signalled the
outlook for growth and inflation was uncertain.
Germany's 2-year yields, which is sensitive to
expectations for policy rates, were last very slightly lower on
the day at 2.701%, from 2.673% before the decision.
However, a statement from U.S. President Donald Trump that
the U.S. will be hitting Iran "very hard" on Thursday night also
pushed yields higher just after the ECB decision.
Yields were lower before the meeting, with oil prices
falling slightly as traders monitored the latest headlines on
U.S.-Iran peace talks.
The ECB raised interest rates to 2.25%, from 2%, saying:
"The war in the Middle East is generating inflation pressures,
and the decision to raise rates is robust across a range of
scenarios mapping out how the shock might evolve."
It added: "The outlook remains uncertain, with upside risks
for inflation and downside risks for economic growth."
The ECB is keen to stamp out any danger that inflation will
pick up pace after it struggled to contain rising costs in the
wake of Russia's invasion of Ukraine in 2022.
Euro zone inflation rose to 3.2% in May, its highest since
September 2023, as energy costs surged.
Traders were last pricing in around 45 bps of further hikes
this year, little changed from before the decision. They will
now look to ECB President Christine Lagarde's press conference
for further clues about the outlook.
Germany's 10-year government bond yield, the
euro area's benchmark, was last down 1 bp at 3.056%, from around
3.04% before the decision. Yields move inversely to prices.
It reached 3.20% in mid-May, its highest level since May
2011, before signs of an economic slowdown driven by the Iran
war helped pull yields lower.