LONDON, Feb 27 Reuters Euro zone bonds are trading more in sync with their U.S. peers than ever before, as investors ignore the slowdown in Europe and remain laserfocused on inflation and interest rates, driving correlations between the two markets to a record high in recent weeks.

Although the enormous U.S. bond market typically exerts a big influence, the tight correlations have puzzled some bond analysts, given the weakness of the euro zone economy.

American bank State Street found the 52week correlation between moves in German and U.S. twoyear bond yields has risen to a record high. Correlations between longer bonds are also highly elevated.

The U.S. has always driven everything, but not to this magnitude, said Jon Jonsson, senior fixed income portfolio manager at Neuberger Berman. The correlations have gone up quite dramatically, this is really stunning.

He added As an investor, it39;s difficult. You try to make country specificbets, but you39;re not getting any benefit.

The U.S. economy has powered ahead of Europe39;s, where governments spent less during the pandemic and industries have been hit hard by the energy crisis.

Euro zone gross domestic product grew just 0.5 in 2023, while U.S. GDP rose 2.5. Surveybased data shows the U.S. private sector is growing, while the euro zone39;s is contracting.

But bond investors and strategists say inflation has become almost the sole focus of markets. They also note that the European Central Bank typically follows the…