Investing.com – European bond yields eased on Friday, closing out a rollercoaster week defined by a breakthrough Middle East peace deal, an unexpected gut-punch from a hawkish Federal Reserve, and a shaky peace deal.
The yield on the benchmark – the eurozone’s benchmark – jumped at 2.95% after having touched two-month lows this week.
U.S. Vice President JD Vance backed out of a planned trip to meet Iranian negotiators in Switzerland which was scheduled later in the day to begin talks on implementing the 14-point agreement struck between Washington and Tehran – casting doubts over the solidness of the peace deal.
On that note, crude prices inched upn nearly 1%.
Meanwhile, the mid-week turbulence stemmed from Washington, where a majority of Fed policymakers blindsided the market by hinting at a rate hike later this year.
Investors, who had been holding out hope for a pause or incoming cuts, rushed to rewrite their forecasts – suddenly backing an 80% probability of an October hike.
It was a sharp contrast to the start of the week, when Eurozone debt rallied on news of the U.S.-Iran peace accord and the reopening of the Strait of Hormuz.
During the peak of the conflict, skyrocketing oil prices had driven yields to multi-month highs, forcing fixed-income markets to price in an inflation shock that would compel ECB rate hikes.
A 10% collapse in oil prices this week paved way for investors to change that narrative, which in-turn gave beaten-down Eurozone bonds some breathing room as geopolitical risk premiums unwound.
The policy-sensitive , which moves in lockstep with near-term European Central Bank rate projections, gained to 2.628%.
ECB’s Chief Economist Philip Lane said the bloc’s economy could hold out positively with higher interest rates.
SOURCE LINK : Euro zone yields gain as U.S. cancels Iran talks triggers oil uptick By Investing.com
