EU area yields rise slightly; focus on PMI data and Ukraine ceasefire
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Eurozone government bond yields increased modestly on Monday as investors positioned themselves ahead of key Purchasing Managers' Index (PMI) data, balancing economic uncertainties linked to impending U.S. tariffs against optimism from recent German investment initiatives.
Germany’s benchmark 10-year government bond yield rose by 2 basis points (bps) to 2.79%, recovering slightly from last Friday’s level of 2.746%, its lowest since March 5. Similarly, the more ECB policy-sensitive German 2-year yield increased by 1.5 bps to reach 2.14%, reflecting market expectations for the European Central Bank’s deposit rate to stabilize near 2% by the end of 2025 and maintain this level through mid-2026.
Italian government bonds showed a comparable upward trend, with the 10-year yield rising 2.5 bps to 3.85%. Consequently, the spread between Italian and German 10-year yields remained steady at around 102 bps, indicating persistent but manageable risk differentiation within the Eurozone periphery.
Market participants are closely monitoring geopolitical developments, particularly the Ukraine ceasefire negotiations currently underway in Riyadh between U.S. and Russian delegations. Outcomes from these discussions could significantly influence investor sentiment and broader risk appetite.
Furthermore, looming U.S. reciprocal tariffs set to take effect on April 2 continue to introduce downside economic risks, with potential implications for European growth prospects. Investors will closely analyze today's PMI data releases for clearer insights into regional economic health and the possible trajectory of future ECB policy actions.
Germany’s benchmark 10-year government bond yield rose by 2 basis points (bps) to 2.79%, recovering slightly from last Friday’s level of 2.746%, its lowest since March 5. Similarly, the more ECB policy-sensitive German 2-year yield increased by 1.5 bps to reach 2.14%, reflecting market expectations for the European Central Bank’s deposit rate to stabilize near 2% by the end of 2025 and maintain this level through mid-2026.
Italian government bonds showed a comparable upward trend, with the 10-year yield rising 2.5 bps to 3.85%. Consequently, the spread between Italian and German 10-year yields remained steady at around 102 bps, indicating persistent but manageable risk differentiation within the Eurozone periphery.
Market participants are closely monitoring geopolitical developments, particularly the Ukraine ceasefire negotiations currently underway in Riyadh between U.S. and Russian delegations. Outcomes from these discussions could significantly influence investor sentiment and broader risk appetite.
Furthermore, looming U.S. reciprocal tariffs set to take effect on April 2 continue to introduce downside economic risks, with potential implications for European growth prospects. Investors will closely analyze today's PMI data releases for clearer insights into regional economic health and the possible trajectory of future ECB policy actions.