FX.co ★ German Bund Yields Hit Four-Month Low

Germany's 10-year Bund yield dropped below 2.55%, marking its lowest point since June 25. This decline is attributed to investors seeking safety amidst rising US-China trade tensions and new indications of credit stress within the US banking sector. On Thursday, Beijing accused Washington of creating panic over its rare earth export restrictions and declined to retract these measures. Concurrently, shares in the banking sector fell globally after two US regional banks reported losses linked to bad and possibly fraudulent loans, intensifying fears about the global credit market's health. In reaction, money markets have heightened expectations for interest rate cuts from both the European Central Bank (ECB) and the Federal Reserve (Fed). Traders now estimate an 80% chance of a 25 basis point rate cut from the ECB by July 2026, with the main rate projected to reach approximately 1.8% by the end of the following year. The Fed is anticipated to implement at least two 25-basis-point cuts in their final meetings this year.