Eurozone Bond Yields Fluctuate Amid US Tariff Court Ruling, ECB Rate Cut Expectations

Eurozone government bond yields have shown mixed movements amid ongoing uncertainty about U.S. trade policies and economic outlook. German 10-year bond yields reached a three-week low, reflecting concerns about the long-term impact of U.S. tariffs and prompting expectations of European Central Bank rate cuts, with markets pricing in a 90% chance of a 25 basis points cut next week. However, following a U.S. federal court's ruling that blocked most of President Trump's sweeping tariffs, investors shifted away from safe-haven assets like bonds, causing yields to rise slightly in some reports. The ruling has added uncertainty, as the Trump administration has appealed and could pursue alternative tariff measures, complicating trade negotiations. Italy's bond yields declined in some accounts but rose in others, with the yield spread between Italian and German bonds narrowing to its smallest level since early 2021, signaling a recalibration of risk perception. Overall, these developments highlight the significant influence of U.S. trade policies and local inflation data on eurozone bond markets and investor confidence.