Bund yields hit more than one-week low ahead of ECB meet
Updates at 0805 GMT
Oct 16 (Reuters) -The euro zone's benchmark Bund yields eased to a more than one-week low on Wednesday, ahead of a widely-expected interest rate cut from the European Central Bank later this week.
Germany's 10-year bond yield DE10YT=RR dipped 2 basis points to 2.207%, its lowest since Oct. 4.
However, the rally in bond prices, which move inversely to yields, slowed from a day earlier, when a sharp slide in oil prices calmed inflationary worries.
All eyes will be on the ECB meeting on Thursday, where money markets are fully pricing in a quarter-point rate cut, and another move before the end of the year.
Expectations of more ECB rate cuts to support a weakening economy, along with receding bets on a jumbo rate cut from the Federal Reserve have weighed on eurozone yields recently.
"The only thing that could hold the ECB back from a dovish cut would be sticky core and services inflation," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
A final reading of Eurostat's euro zone inflation data for September is due on Thursday, before the ECB decision.
Germany's two-year bond yield DE2YT=RR, which is more sensitive to rate expectations, slipped nearly 2 bps to 2.197%, also near its lowest since Oct. 4.
Focus is also on Germany's 30-year debt auction where the government will raise 2 billion euros, according to UniCredit.
Elsewhere, yield on two-year British government bonds fell sharply the after weaker-than-expected inflation data prompted investors to raise their bets on the Bank of England cutting interest rates.
Italy's 10-year yield IT10YT=RR was lower by 1.5 bps at 3.45%, and the gap between Italian and German bunds DE10IT10=RR widened by 3 bps to 124.30, but remained near the tightest since July.
Italy's Prime Minister Giorgia Meloni said on Tuesday the government plans to raise 3.5 billion euros ($3.81 billion) from domestic banks and insurers after her cabinet approved budget plans for the next three years.
Rome is under an EU disciplinary procedure due to a budget deficit last year of 7.2% of GDP, far above the bloc's 3% limit and also the highest in the euro zone.
Reporting by Medha Singh in Bengaluru; Editing by Andrew Heavens and Varun H K
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