Tariffs Trigger Tumbling: Euro Bond Yields Dive on Trump's Trade Threat

In a significant market shift, Euro area government bond yields fell sharply following U.S. President Donald Trump's recommendation for a 50% tariff on European Union imports starting June 1. This aggressive trade stance targets both iconic companies like Apple and various EU imports, escalating fiscal tensions and affecting European economies.

Germany's crucial 10-year bond yield notably decreased by 7.5 basis points to 2.54%, marking its first weekly decline in more than a month. The ECB's deposit facility rate forecast for December dropped to 1.60%, with traders now anticipating a 90% chance of a rate cut in June, responding to Trump's unexpected announcement.

Amid these developments, U.S. Treasury yields also tumbled, reflecting broad market adaptations. Economic data highlighted significant growth for Germany's economy in early 2025, although wage growth in the Eurozone moderated. Analysts emphasize the implications of these shifts amid ongoing credit evaluations by finance agencies like Moody's and S&P regarding Italy's fiscal standing.

(With inputs from agencies.)