Germany’s 10-year Bund yield was above 2.5% as investors weighed the conflict in the Middle East and the outlook for monetary policy. President Trump’s announcement of a ceasefire between Israel and Iran temporarily eased fears of energy supply disruptions, though the truce remains fragile, with Israel already accusing Iran of violating the agreement.
On the economic front, Germany’s Ifo business climate index rose to its highest level in nearly a year, signaling improved sentiment. However, flash PMIs offered a mixed picture, with signs of stabilization in private sector activity across the Euro Area. Regarding monetary policy, market expectations remain firm for a 25-basis-point rate cut by the ECB before year-end. President Lagarde said that “at the current interest-rate levels, we believe that we are in a good position to navigate the uncertain circumstances” while member Villeroy de Galhau said that the ECB could still cut interest rates in the next half year.
