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2026-04-07 19:21:06
[Eurozone Bond Market Volatile as Trump's Iran Deadline Approaches, Rate Hike Expectations Resurface] ⑴ Eurozone bond yields rose slightly in volatile trading on Tuesday as uncertainty surrounding the Iran war and the approaching US ultimatum on a potential agreement deadline weighed on the market. Chief economists stated that the market faces two starkly different prospects: a short-term ceasefire or a large-scale escalation of the conflict, leaving investors uncertain about which direction to bet on. ⑵ The governor of the Belgian central bank stated that if the war continues, the European Central Bank may need to raise interest rates on April 30th or even earlier. The market has already priced in at least two rate hikes, with a high probability of a third, whereas before the outbreak of the Iran war, the market only anticipated a slight rate cut this year. ⑶ In terms of trading psychology, the benchmark German 10-year bond yield rose to 3.0294%. The market had previously recorded its first weekly decline since the conflict due to hopes for a credit rating downgrade, but new developments such as the attack on the Iranian railway bridge and a sharp drop in exports from the Saudi port of Yanbu are forcing investors to reprice inflation expectations. Any signal of no agreement before the deadline will trigger a new round of safe-haven selling.
