Germany’s 10-year Bund yield fell back below 3%, its lowest level since mid-April, as progress in Iran peace talks and easing inflation fears sparked a sharp retreat from last week’s 15-year high of 3.2%. That earlier surge had been driven by expectations of interest rate hikes after the Iran conflict disrupted energy markets.
The reversal in yields coincided with a pullback in crude prices from four-year highs, with Brent slipping below $100 a barrel after US President Donald Trump said a memorandum of understanding between Washington and Tehran had been “largely negotiated” and would reopen the Strait of Hormuz.
Separately, PMI data showed the Eurozone economy contracted in May at its fastest pace since late 2023, as a war-driven jump in living costs weighed on activity. S&P Global warned that the readings suggest inflation is heading toward 4%. In response, traders now fully price in two European Central Bank rate hikes this year.
