Germany’s 10-year Bund yield declined to 2.924%, edging closer to its lowest level since March 17, as weaker economic data and more cautious messaging from the European Central Bank dampened expectations of further rate hikes. June figures showed contractions in both German private sector activity and French business activity, heightening concerns about the region’s growth prospects.
ECB President Christine Lagarde indicated that the central bank sees no need for a stronger policy response to the conflict involving Iran, emphasizing that there is no evidence of an inflation spike that would warrant more aggressive tightening. Her remarks contrasted with the more hawkish stance of the US Federal Reserve, where markets continue to price in additional rate increases.
Earlier this month, the ECB raised interest rates by 25 basis points, though the move had only a limited impact on markets, as it had been widely anticipated.