Global Trade War Sends Ripples Through German and U.S. Bond Markets

Longer-dated German bonds remained stable amidst a sell-off in U.S. Treasuries. U.S. tariffs inflame global trade tensions, prompting yield fluctuations. The European Central Bank might cut interest rates due to anticipated growth impacts. The spread between German and U.S. 10-year yields widened as differing perceptions of safety emerged.

German bonds exhibited little change on Wednesday, despite earlier losses triggered by a sell-off in U.S. Treasuries, reflecting investor distinctions among safe assets in response to tariff-induced market disruptions. Short-term bonds climbed as speculation grew about a potential interest rate cut by the European Central Bank this year.

President Donald Trump's imposition of reciprocal tariffs on multiple countries intensified the global trade war, notably slapping 104% duties on Chinese goods. In response, China reiterated its reluctance for conflict but vowed to contest the U.S. should Trump amplify trade tensions.

Germany's benchmark 10-year yield dipped 1 basis point to 2.62%, but was previously elevated at 2.675%. In comparison, the 10-year U.S. Treasury yield rose significantly, pushing the yield spread to approximately 177 basis points. Analysts suggest a growing perception of U.S. Treasuries' reliability under strain, prompting sell-offs.

(With inputs from agencies.)