FX.co ★ German Bund Yields Rise as Trade Optimism Lifts Risk Appetite

Germany's 10-year Bund yield soared to near 2.6%, marking its highest point since April 8, driven by renewed optimism surrounding trade negotiations, which has spurred interest in riskier investments. In a joint announcement on Thursday, U.S. President Donald Trump and British Prime Minister Keir Starmer revealed a limited bilateral trade agreement. Although this arrangement retains Trump's 10% tariffs on imports from the UK, it significantly lowers the steep U.S. tariffs on British car exports. This agreement could pave the way for similar trade deals with other nations. Moreover, upcoming trade discussions between Washington and Beijing are set to resume this weekend, heightening expectations that the substantial 145% tariffs on Chinese goods might be reduced. In light of these evolving trade conditions, money markets have adjusted to reflect a European Central Bank (ECB) deposit rate of 1.67%, up from below 1.55% in mid-April. This adjustment follows indications from the ECB that it may further decrease borrowing costs to mitigate the potential impact of U.S. tariffs on economic growth and inflation.