Germany’s 10-year Bund yield hovered around 3%, remaining close to the 15-year highs reached earlier this month, as persistent inflation concerns kept borrowing costs elevated. Geopolitical tensions also weighed on sentiment after the US–Iran standoff intensified: the US Navy fired on and boarded an Iranian-flagged cargo ship, reversing the more conciliatory tone seen just days earlier. On Friday, Iran had said that the strait would remain fully open to commercial traffic during the 10-day ceasefire between Israel and Lebanon.
Uncertainty is also rising over diplomatic channels, with no clarity on whether US and Iranian officials will meet before the 14-day ceasefire between the two countries expires on Tuesday. Meanwhile, the ECB is due to meet later this month and is widely expected to leave borrowing costs unchanged. Market attention is instead centered on the June meeting, though the evolving situation in the Middle East could reshape expectations. On Friday, the IMF said it anticipates the ECB will raise rates by around 50 bps in 2026 to preserve a neutral monetary policy stance.
