Euro Zone Bonds Stabilize Amid Market Jitters

Euro zone Bund yields rose as anxieties regarding U.S.-China trade and U.S. regional banks eased. Despite France's surprise credit downgrade, markets remained steady with limited immediate impact. Germany's 10-year Bund yields showed minor increases amid subdued market movements and expectations around ECB's upcoming rate decisions.

Euro zone benchmark Bund yields witnessed a steady rise on Monday as market concerns over U.S.-China trade tensions and the health of U.S. regional banks began to wane. The recent flight into safe-haven assets, prompted by these jitters, appeared to slow down, while Friday's unexpected credit downgrade for France had minimal impact on the market's direction.

Wall Street futures, recording a 0.3% increase at 1015 GMT, saw a positive end to indexes last week, contributing to a 0.6% rise in Europe's STOXX 600. Germany's 10-year Bund yields marked a 1 basis point rise to 2.59%, following a substantial weekly drop. Investors remain focused on credit stress in U.S. regional banks and trade tensions, influencing current market trends.

Despite the downgrade of France's S&P Global credit rating, which anticipates political instability affecting financial reforms, the reaction was muted. Analysts suggest that the downgrade is more impactful for long-term investors. Meanwhile, money markets predict no change to ECB's base rate this month, with a possible 25 bps rate cut by July 2026.

(With inputs from agencies.)