FX.co ★ German Bund Yield Falls Back to 2.6%

Germany's 10-year Bund yield saw a reversal of its earlier rise, settling back at the 2.6% level. This shift occurred as investors gravitated towards safer assets following the implementation of U.S. President Donald Trump's "reciprocal" tariffs on numerous countries. Notably, these tariffs include a significant 104% duty on Chinese imports and a 20% levy on goods from the European Union. Consequently, market participants heightened their expectations for an interest rate cut by the European Central Bank (ECB) within the year. Money markets have fully factored in a 25 basis point reduction by the ECB at its April meeting, with predictions for two additional cuts before the year's end—one potentially as early as June—and increasing conjecture about a third cut. Furthermore, reports surfaced that Germany's conservative bloc, headed by chancellor-to-be Friedrich Merz, reached an agreement with the center-left Social Democrats (SPD) on Tuesday to establish a new government.