Euro zone yields eye biggest weekly fall since end-June; Hormuz watched
TLT•Italian-German spread
The yield gap between Italian government bonds and German bunds <DE10IT10=RR> was at 76 bps. It was at 63 bps in February before the attack on Iran and hit 103.62 in late March, the widest since June 2025.
German yields and ECB rate bets
German 2-year bond yields, which are more sensitive to interest rate expectations, rose 2 basis points to 2.76% but were on course for a 5.5-bp weekly fall.
Germany's 10-year bond yield was up 2 bps to 3.14%, and on track for a 6-bp weekly drop.
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%. They indicated a deposit rate of about 2.80% late last week.
Markets are also awaiting U.S. employment data due later in the session, which could shape expectations for the Federal Reserve's interest rate trajectory.
Euro zone bond yields on track for weekly decline
Euro zone government bond yields were on track for the biggest weekly fall since end-June, as hopes for a deal on reopening the Strait of Hormuz eased oil prices, reduced inflation concerns and led to a slight trimming of bets on ECB rate hikes.
U.S. President Donald Trump told reporters on Thursday that he believed the war with Iran would be over soon.
However, borrowing costs climbed for a second day on Friday after oil prices rose and the latest developments suggested tensions between Iran and the U.S. have yet to ease.
