Eurozone Bond Yields Fall Amid Renewed Hopes for U.S.-Iran Agreement

Eurozone government bond yields declined on Monday as hopes resurfaced for a U.S.-Iran agreement to reopen the Strait of Hormuz, easing inflation concerns and reducing expectations for aggressive central bank rate hikes. According to Jin10, U.S. Secretary of State Rubio stated on Monday that the U.S. would either reach a 'good agreement' with Iran or handle the issue 'in another way.' Currently, the money market anticipates the European Central Bank's deposit rate to be 2.57% in December, down from the 2.65% expected late last Friday, with the current rate at 2%. The market also shows a 70% probability of a first rate hike next month, down from the previous 80%. Germany's two-year government bond yield, which is more sensitive to policy rate expectations, fell by 6.5 basis points to 2.5758%, marking the lowest level since May 8. This yield had reached 2.771% in late March, the highest since July 2024.