FX.co ★ German Bund Yields Slide Toward Seven-Week Low

German 10-year Bund yields fell toward 2.95%, nearing their lowest level since April 8, as optimism grew over a potential US-Iran peace agreement. Investors remained focused on developments in the Middle East, encouraged by the recent absence of negative signals from either side and sustained hopes that, despite recent strikes, a deal to ease tensions and reopen the Strait of Hormuz might still be reached. Money markets now expect the ECB’s deposit rate to stand at 2.6% by December, up from the current 2% but below last week’s projection of 2.75%, and are pricing in an 80% probability of a first rate hike next month. At the same time, ECB official Isabel Schnabel told Reuters that the central bank should raise interest rates in June even if a peace deal is concluded, citing the magnitude and persistence of the energy shock.