Bund yields close to one-month low on tariff worries
By Stefano Rebaudo
Feb 5 (Reuters) - Euro area benchmark Bund yields edged down near to their one-month low as investors worried about the possible deflationary impact of U.S. tariffs.
Analysts reckoned that U.S. import duties could lead the European Central Bank to deepen its monetary easing path.
Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, fell 2 basis points (bps) to 2.38%, after hitting 2.359% on Monday, its lowest since early January.
Italy's 10-year yield IT10YT=RR was 2.5 bps down at 3.473%, its lowest level since late December. The gap between Italian and German yields DE10IT10=RR stood at 109 bps.
Germany's two-year bond yield DE2YT=RR, which is more sensitive to ECB rate expectations, was down one bp at 2.05%.
Money markets priced in an ECB depo rate at 1.87% in December EURESTECBM7X8=ICAP from 1.95% late Friday.
The yield spread between OATs and Bunds DE10FR10=RR -- a market gauge of the risk premium investors demand to hold French debt -- was at 72 bps, after hitting 69.90 bps on Tuesday, its tightest level since Oct. 31.
It widened to around 90 bps, its highest since 2012, in mid-January and end-November amid fears that France would be unable to cut its growing budget deficit.
French far-right leader Jordan Bardella suggested on Tuesday his party would likely not back no-confidence motions against Francois Bayrou's minority government, which rammed the 2025 budget bill through parliament on Monday.
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