Euro Zone Bonds Experience Largest Weekly Drop Amid Tariff Worries

Euro zone bond yields faced significant weekly declines as fear of tariffs and a U.S. economic slowdown loomed. Germany's passage of a major debt rule overhaul and infrastructure fund found little market reaction, while uncertainties surrounding U.S. tariff decisions spurred investor caution towards government bonds.

In an eventful week, euro zone bond yields saw their sharpest weekly fall since November, as traders adjusted to the specter of rising tariffs and a potential economic deceleration in the United States. This decline followed previous increases driven by Germany's announcement of expansive spending plans.

On Friday, Germany's Bundesrat approved a change to the debt rule alongside a considerable infrastructure fund. Despite the significant nature of this decision, bond markets remained largely unmoved. Notably, Germany's 10-year bond yield fell two basis points, in line to drop 11 basis points throughout the week.

Financial institutions remain cautious amidst concerns over U.S. President Donald Trump's proposed tariff strategy, scheduled for decision by April 2. These uncertainties, coupled with a dovish stance from the U.S. Federal Reserve and impactful fiscal changes in Germany, have driven investors toward safer government bonds.

(With inputs from agencies.)