Bond Yields Surge Amid Eased Trade Tensions

Eurozone bond yields reached a monthly high as geopolitical tensions eased, and the ECB reduced interest rate cut bets. After U.S.-China trade talks, tariff reductions were announced. Ukrainian and Russian leaders plan to meet, keeping geopolitical tensions low. ECB's Schnabel warns against further rate cuts amid inflation concerns.

Eurozone benchmark bond yields have hit a new one-month high, with investors adjusting their expectations for European Central Bank (ECB) interest rate cuts. This shift comes as trade and geopolitical tensions have lessened, alleviating concerns about economic growth.

Following talks in Geneva with Chinese officials, U.S. Treasury Secretary Scott Bessent announced a 90-day pause on measures, resulting in tariff reductions to 10%. Meanwhile, geopolitical tensions have remained subdued, with Ukrainian President Volodymyr Zelenskiy agreeing to meet Russian President Vladimir Putin, and a fragile ceasefire persisting between India and Pakistan.

The German 10-year yield, a key Eurozone benchmark, increased significantly, reflecting the changing market dynamics. Concerns remain around U.S. tariffs and their impact. ECB board member Isabel Schnabel commented on avoiding further rate cuts due to rising inflation risks. Analysts like Berenberg's Holger Schmieding suggest that Trump's trade policies could cause substantial harm to the U.S. economy, despite easing global tensions.

(With inputs from agencies.)