Euro zone bond yields steady as Trump tariff deadline arrives
By Samuel Indyk
LONDON, July 9 (Reuters) - Euro zone government bond yields were little changed on Wednesday as investors took in their stride U.S. President Donald Trump's plans for additional import levies, on the day when his original 90-day tariff pause was due to expire.
Trump broadened his trade war late on Tuesday, threatening a 50% tariff on imported copper and levies on the pharmaceutical and semiconductor industries, one day after announcing larger tariffs on 14 trade partners, including Japan and South Korea.
The European Union said on Wednesday it could reach an outline trade agreement with the U.S. in the coming days, while Trump promised that he would deliver further tariff notices on unnamed countries.
That left bond investors in Europe in wait and see mode.
Germany's 10-year bond yield DE10YT=RR, the euro zone's benchmark, dropped one basis point to 2.63%. It hit its highest since May 16 on Tuesday at 2.668%. The 30-year yield DE30YT=RR was flat at 3.16%.
"We're waiting for some news (on tariffs), and I think people are becoming immune to all the noise," said Jens Peter Sørensen, chief analyst at Danske Bank.
"Maybe markets are a little bit too complacent here," he added.
Italy's 10-year yield IT10YT=RR, the benchmark for the euro zone's periphery, also dropped 1 bp to 3.563%, keeping the spread between Italian and German 10-year yields DE10IT10=RR at about 91 bps.
Monetary policy expectations in the euro zone remain relatively stable, after the European Central Bank signalled it would pause its rate cutting cycle following 200 basis points of easing since the middle of last year.
Markets are not expecting the ECB to lower rates at its policy meeting on July 24, while only 23 bps of easing is priced in by the end of the year, implying one more quarter-point cut.
"People are generally waiting for some new information from the ECB," Danske Bank's Sørensen added.
"Policy expectations have stabilised. There could be one more rate cut but that's about it."
Germany's policy-sensitive 2-year yield DE2YT=RR was little changed at 1.86%.
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