UPDATE 2-Bund yields hover at multi-month lows as investors weigh US tariff ruling

The European Parliament ‌on Monday decided to postpone for a second time a vote on the European Union's trade deal with the U.S. Trump ‌said on Saturday he would now raise a temporary tariff of 15% on U.S. imports from all countries, a move that could cushion the impact on U.S. budget revenues. "In terms of market impact, first and foremost it creates a lot of uncertainty over how the tariff policy would evolve over the ⁠coming months," ​Mohit Kumar, an economist at ⁠Jefferies, said.

Euro area benchmark Bund yields hovered ​near multi-month lows on Monday as investors awaited data ​and weighed the impact of the U.S. ‌Supreme ​Court's decision to strike down President Donald Trump's tariffs. Analysts said there was deep uncertainty over the U.S. administration's future actions, even though many existing deals on tariffs and trade had ‌been hammered out in bilateral agreements and were not directly impacted by the Supreme Court ruling. U.S. Trade Representative Jamieson Greer said on Sunday that none of the countries that had reached trade deals with the U.S. had indicated plans to withdraw. The European Parliament ‌on Monday decided to postpone for a second time a vote on the European Union's trade deal with the U.S. Trump ‌said on Saturday he would now raise a temporary tariff of 15% on U.S. imports from all countries, a move that could cushion the impact on U.S. budget revenues.

"In terms of market impact, first and foremost it creates a lot of uncertainty over how the tariff policy would evolve over the ⁠coming months," ​Mohit Kumar, an economist at ⁠Jefferies, said. Jefferies was not changing any of its views on the market, Kumar added. Germany's 10-year government bond yield, the euro area's benchmark, dropped roughly two ⁠basis points (bps) to 2.718%, its lowest since December 1, after trading around 2.9% early this month. German business morale rose slightly more than expected in February, ​pointing to the German economy finally turning a corner. U.S. Treasury yields fell on Monday, with those of benchmark 10-year ⁠paper down 3.5 bps at 4.05%, after edging up last Friday.

Investors are awaiting U.S. producer prices data on Thursday and inflation figures from Germany, France and ⁠Spain ​on Friday. "Inflation data for February should show that the disinflation trajectory remains gradual," said Rainer Guntermann, rate strategist at Commerzbank. Economists have warned that a strong euro could amplify the deflationary impact of China's export machine and potentially push the ECB toward ⁠cutting rates. Data recently showed the EU's trade surplus kept shrinking, as rising Chinese imports crowded out domestic production. Germany's two-year yields, ⁠more sensitive to expectations for policy ⁠rates, fell 1.9 bps to 2.05%. Italy's 10-year government bond yields were down 1.6 bps at 3.33%. The gap to Bunds was at 57.9 bps, having fallen to 53.50 in mid-January, its ‌lowest since August ‌2008.

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