Euro Zone Bonds Surge as Markets Brace for US Tariff Fallout

Euro zone bond yields fell following new U.S. tariff announcements by President Trump, increasing market expectations of European Central Bank rate cuts. Germany's yields dropped significantly, and market analysts predict further economic shifts due to the global trade war concerns.

On Thursday, euro zone government bond yields decreased as the market raised expectations for further European Central Bank rate cuts, reacting to President Donald Trump's announcement of new U.S. tariffs. This situation has amplified worries about a potential trade war and its adverse effect on global growth.

Money markets are now betting with a 92% likelihood on a 25 basis point ECB rate cut by April, up from 80% the previous day. German government bond yields, which serve as an important benchmark for the euro area, fell significantly, suggesting increased market nervousness.

Analysts at UBS project the U.S. economy's growth may slow down, potentially prompting a future rate cut by the Federal Reserve. Meanwhile, the yield spread between U.S. Treasuries and German Bunds has narrowed, potentially attracting more investors to European markets.

(With inputs from agencies.)