Euro Zone Bond Yields Rise Amid U.S. Tariff Flexibility

Euro zone bond yields increased on Tuesday in anticipation of a German business sentiment survey and potential flexibility in U.S. tariffs. U.S. President Donald Trump indicated some levies might not be imposed, sparking a rally in U.S. stocks and a selloff in bonds, impacting yields.

Euro zone bond yields showed an upward trend on Tuesday as investors geared up for a German business sentiment survey, while U.S. tariff flexibilities hinted at by President Donald Trump added to market clarifications.

On Monday, President Trump suggested not all his threatened tariffs would take effect on April 2, allowing certain countries exemptions. This announcement led to a significant rally in U.S. stock markets and a concurrent selloff in the bond market, where yields inversely reacted to price drops.

The 10-year bond yield in Germany, a critical benchmark in the euro zone, gained by 1.9 basis points to 2.792%, alongside a rise in Italy's 10-year yield by 1.1 basis points at 3.892%. The yield gap between Italian and German bonds stood at 109 bps. Meanwhile, investors are awaiting the Ifo institute's report on German business climate, crucial for assessing business morale post Germany's significant legislative boost in infrastructure and defense.

(With inputs from agencies.)