Germany’s Bund Yield Eases Following US-EU Trade Agreement

Germany’s 10-year Bund yield dipped slightly below 2.7%, easing after a 10 basis point rise last week, as markets reacted to the newly announced US-EU trade agreement. The deal sets a 15% base tariff on most EU exports to the US—including automobiles, semiconductors, and pharmaceuticals—while keeping 50% tariffs on steel and aluminum, though only above certain quotas. In contrast, aerospace components, select chemicals, and raw materials will be exempt. As part of the agreement, the EU also committed to purchasing $750 billion worth of US energy and additional military equipment. On the monetary policy front, investors have scaled back expectations for further rate cuts by the ECB following its decision to hold rates steady for the first time in a year and as President Lagarde stated the eurozone is “in a good place” with inflation back to target. However, uncertainty surrounding the broader economic impact of the new tariffs could weigh on the outlook.