FX.co ★ Bund Yields Rise as Investor Sentiment Improves

German 10-year Bund yields inched back up to 2.7% on Tuesday as investors processed stronger-than-anticipated investor sentiment data, while gearing up for a significant week of central bank activities. The ZEW Indicator of Economic Sentiment in Germany rose to 37.3 in September, an increase from August’s 34.7 and notably surpassing market expectations of 26.3. This improvement indicates stabilizing expectations, with financial market experts maintaining cautious optimism despite ongoing risks related to US trade policy. Attention is now focused on the Federal Reserve, which is expected to reduce rates by at least 25 basis points on Wednesday. Policymakers are tasked with managing a cooling labor market while counteracting inflationary pressures caused by tariffs. Meanwhile, central banks in the UK and Japan are anticipated to maintain current policies. In Europe, the European Central Bank (ECB) held rates steady for the second consecutive meeting last week, suggesting its cycle of rate cuts may have concluded.