Eurozone Bond Yields Rise as U.S.-China Trade Talks Boost Risk Sentiment

Positive U.S.-China Trade Talks Boost Eurozone Bond Yields

Positive developments in U.S.-China trade talks over the weekend have fueled risk-on sentiment in the markets, resulting in higher government bond yields across the eurozone. The 10-year Bund yield rose by 5 basis points, reaching 2.604%, while other eurozone government bond yields increased by as much as 6.5 basis points in early trading.

This upward movement in yields is a typical response to improved market sentiment, as investors move away from safe-haven assets like German Bunds in favor of riskier investments. A stronger risk-on mood tends to reduce demand for these bonds, pushing their yields higher.

Despite this positive market reaction, money markets are still pricing in two interest rate cuts by the European Central Bank (ECB) this year. According to LSEG data, the terminal deposit rate is expected to be at 1.75%. These rate cuts could influence future bond market dynamics and provide further context to the ongoing eurozone economic outlook.