Euro zone bond yields fell yesterday, catching up with overnight remarks from President Donald Trump that a deal between Iran and the US could be signed as soon as this weekend and reopen the key Strait of Hormuz.
Shorter-dated, central bank-sensitive bonds led the rally, with Germany’s two-year yield down 5 basis points at 2.619 per cent, earlier touching its lowest in 10 days at 2.581%.
Italy’s two-year yield fell 6 bps to 2.804%.
A Western source told Reuters a memorandum between Washington and Tehran to end their conflict could be signed as soon as tomorrow.
Trump later called reports of the terms in the proposed memorandum to end the war inaccurate, but investors clung to hopes that a deal could be close.
The 10-year German yield, the euro zone benchmark, dropped 2 bps to 3.002%.
Yields have been moving in step with war headlines, as traders weigh how long the Strait of Hormuz might remain closed.
Prolonged disruption and elevated oil prices risk feeding through into broader inflation and forcing central banks to raise interest rates.
Underscoring this risk, the European Central Bank raised rates on Thursday
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