Eurozone Bond Yields Drop Amid Anticipation of US Tariffs and ECB Rate Decision

Eurozone bond yields fell as traders prepared for U.S. tariffs and possible ECB rate cuts in April. Germany's bond yields declined, and Italy's reached new lows. EU's response to tariffs and inflation expectations suggest an ECB rate cut. Unemployment dropped and manufacturing output rose, influencing market sentiments.

On Tuesday, eurozone bond yields experienced a decline as traders awaited the announcement of U.S. President Donald Trump's reciprocal tariffs, expected on Wednesday. The market also factored in expectations of a European Central Bank (ECB) rate cut in April, supported by fresh inflation figures.

Germany's 10-year bond yield, acting as the benchmark for the eurozone, dropped by 5 basis points to 2.679%, while Italy's 10-year yield decreased to its lowest level since March 5, at 3.785%. The yield gap between Italian and German bonds narrowed by 3.1 basis points.

Attention was also focused on ECB's next meeting, amid expectations of a 25 basis point rate cut if inflation continues aligning with forecasts. EU executive chief Ursula von der Leyen expressed intentions to negotiate solutions to tariffs, while employment data showed positive economic signals, bolstering market anticipations.

(With inputs from agencies.)