(Reuters) – German bond yields reached a month higher on Monday and the markets reduced betting on reductions in interest rates of the European Central Bank (ECB) in a context of appeasement of trade and geopolitical tensions.
The United States and China announced on Monday that it has concluded an agreement to reduce their reciprocal customs duties, the US Treasury Secretary, Scott Bessent having told journalists that these measures would be the subject of a 90-day break and that the surcharges would be reduced by more than 100 percentage points to reach 10%.
Washington and Beijing are trying to end a trade war that disrupted the world economy and put the financial markets to the test of the fears of recession and uncertainty about the trajectory of borrowing costs.
On the geopolitical front, hopes of progress towards the end of the war in Ukraine also increased: Russian president, Vladimir Putin, proposed on Sunday to resume direct peace negotiations with Kyiv on May 15 in Istanbul and the Ukrainian president Volodimir Zelensky said he was ready to meet him, while asking for a complete cease-fire from Monday to provide the necessary diplomatic base talks.
Operators now anticipate a 1.75% BCE deposit rate by the end of the year, returning a few base points above the levels expected in mid-April before Frankfurt suggests that it was ready to reduce rates in response to the potential economic impact of customs duties.
The markets bet on a deposit rate by the end of the year to 1.55% on April 25 and 1.67% Friday at the end of the day.
Around 9:11 GMT, the yield of the German Bund at ten years increased from 7.9 base points to 2.6310%. That of his counterpart at two years is advancing more than 11 base points at 1,9060%.
Yields generally evolve unlike prices.
The movement is very similar to the United States, while the demand for treasury bills, considered as a refuge value, decreases and lowers the price of the obligation.
The yield of ten -year -old Treasuries has an increase of 5.8 basic points at 4.4334% and that of two years from 11.3 base points to 3.9956%.
(Written by Stefano Rebaudo; Diana Mandia, edited by Kate Entringer)
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