Germany’s 10-year Bund yield declined to 3.05% as signs of progress in Iran peace talks eased government borrowing costs from their multi-year highs. The yield had touched a 15-year peak of 3.2% on Tuesday, driven by expectations of interest rate hikes after the Iran conflict disrupted energy markets. However, crude oil prices retreated from four-year highs as both Iran and the United States reported headway in negotiations. U.S. Senator Marco Rubio cited “some good signs” in the talks, though Tehran’s uranium stockpile and its control over the Strait of Hormuz remain major sticking points.
Money markets now fully price in two European Central Bank rate increases this year, with about a 60% chance of a third. On the macroeconomic front, German consumer sentiment improved heading into June, contrary to expectations of a further decline, supported by a rebound in income expectations. Business confidence also inched higher in May after hitting a six-year low in April. A separate report confirmed that German GDP grew by 0.3% in the first quarter of 2026.
