FX.co ★ German Bond Yields Move Away from Recent Highs

Germany's 10-year Bund yield has dipped below 2.59%, receding from the six-week peak of 2.69% recorded on May 14th. This shift comes as traders seek further clarity on the ongoing trade conflict and appraise the broader economic landscape and monetary policy directions. The initial wave of optimism, generated by the US and China's accord to engage in a 90-day tariff reduction and recommence trade discussions, has waned. Investors have now turned their attention to the potential economic repercussions, with a particular focus on the United States. The yield spread between the US 10-year Treasury and Germany’s 10-year Bund is approximately 180 basis points, markedly wider than the 150 basis points observed before President Trump’s "Liberation Day" announcement on April 2nd. These developments related to tariffs have prompted a shift towards European assets, leading to a decrease in Bund yields. Meanwhile, regarding monetary policy, the European Central Bank is anticipated to persist with reducing borrowing costs in June and possibly beyond.