Euro zone yields edge up as investors watch Hormuz, await US data
TLT•Italian and French spreads
The yield gap between 10-year Italian government bonds and German Bunds DE10IT10=RR was at 75 bps. It was at 63 bps in February before the start of the Iran war and reached 103.62 in late March, the widest since June 2025. The French spread DE10FR10=RR was at 77 bps.
Euro zone government bond yields move higher
Euro zone government bond yields edged higher on Monday as investors monitored prospects for the reopening of the Strait of Hormuz and awaited U.S. inflation data later this week.
Borrowing costs posted on Friday the biggest weekly fall since June as hopes of an Iran peace deal and weak U.S. data tempered market expectations for central banks’ monetary tightening.
Markets stay cautious on Hormuz and ECB rate expectations
Investors remained cautious about the prospects for a Hormuz deal after Iran reiterated that the United States must meet additional conditions, including compensation and the lifting of sanctions and military threats.
German 2-year bond yields DE2YT=RR, which are more sensitive to interest rate expectations, rose 1.5 basis points to 2.75%. They reached 2.8938% on July 23, their highest in more than two years.
Germany's 10-year bond yield DE10YT=RR was up 0.5 bp at 3.14%. It hit 3.2118% in July, its highest since May 2011.
Money markets scaled back bets on the European Central Bank deposit rate to 2.72% in March 2027 EURESTECBM5X6=ICAP from the current 2.25%.
