Bund yields hit fresh one-month high as trade talks ease economic concerns
May 12 (Reuters) - Euro area benchmark Bund yields hit a fresh one-month high and markets cut bets on European Central Bank interest rate cuts on Monday as less severe trade and geopolitical tensions eased concerns about economic growth.
U.S. Treasury Secretary Scott Bessent said there had been "substantial progress" in trade talks between his team and that of Chinese Vice Premier He Lifeng in Geneva.
On the geopolitical front, Ukrainian President Volodymyr Zelenskiy said he would agree to meet Kremlin leader Vladimir Putin in Turkey on Thursday, while a fragile ceasefire held between India and Pakistan.
Germany's 10-year yield DE10YT=RR, the euro area's benchmark, rose 5.5 basis points (bps) at 2.61%, its highest level since April 11.
Money markets priced in an ECB deposit facility rate of 1.72% by year-end EURESTECBM5X6=ICAP, returning to levels seen in mid-April before the European Central Bank suggested it was ready to cut rates in response to the potential adverse economic impact of U.S. tariffs. They had indicated a deposit rate below 1.55% on April 25 and at 1.67% late Friday.
The German two-year yield DE2YT=RR, more sensitive to European Central Bank policy rates, was up 5 bps at 1.84%.
Italy's 10-year yield rose 4 bps to 3.65% IT10YT=RR, leaving the spread between Italian and German yields – a market gauge of the risk premium investors demand to hold Italian debt - at 101 bps. DE10IT10=RR
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