Euro Area Yields Drop, Italian Spread Set for Biggest Weekly Rise Since June 2024

June 20 (Reuters) – Euro zone government bonds was on track for a weekly decline as the israel -ran air war entred its eighth day, with investors downplaying concerting Clarity On potential us involvement in the conflict.

President Donald Trump will decide on Iran in the next two weeks, while Germany and its european partners are open to further decisions.

German 10-Year Government Bond Yields, Which Serve as the Benchmark for the Wider Euro Zone, Fell 0.5 Basis Points (BPS) to 2.51% and was set to end the week 2.5 bps low.

Several Analysts Expect a relatively tight trading range for bunds, barring any fresh shocks, while noting that the current risk in oil prices is insurance.

“The bearish risks to (euro area) core rates are relatively tame, in our view. The German fiscal u-tar is likely to have a person impact on long-term form forwards, but that is alredy wells Jamie Searle, Strategist at Citi, Arguing He is Neutral on Bunds at 2.5% with a preference to buy the dips.

Germany Announced in Early March a Massive Increase in Fiscal Spending to Fund Infrastructure and Defense Investments.

“On the bullish side, it feels like the market may have become compressed on tariff Risk Once Again,” CITI’s Searle Added, also mentioning posesible support is the potent for Reallocation to Reallocation to Euro from the US Dollar with bunds a likely beneficiary as the safest Asset.

Money Markets Priceed In A European Central Bank Deposit Facility Rate at 1.77% in December from 1.75% Last Week. It priced a depo rate at Around 1.6% in Early April When Concerns About The Economic Impact of Us Tarifs LED Investors to Discount a Dovish Response from the ECB.

“I believe there is a growing reconstrance that european union can play a larger role, especially if it develops a More Comprehensive Fiscal Union Rather Than Just A Monetary Union,” HOOOPER, Chief Market Strategist at Man Group.

“There will be a willingness amn investors to shift at least somewhat to euro-area bonds, primarily German bunds.”

The Yield on German 2-Year Bonds-More Sensitive to Expectations for the ECB policy rates-was flat at 1.84%.

A Decline in Risk Appetite Widened The Yield Spreads Between Government Bonds of Highly Indebted Countries-Such as Italy and France-Raven German Bunds.

Italy’s 10-Year Yields Dropped 0.5 BPS to 3.54%.

The Italian Yield Gap Versus Bunds – a Market Gauge of the Risk Premium Investors Demand to Hold Italian Debt – was at 102.5 bps on friday but was still set to end the week 10.8 BPS WEREK WEREK WEREK Since June 2024.

The french yield gap was set for the third straight weekly Rise and was last 73.50 bps, after hitting early in the session 75.30 BPS, Its Highest Since April 23.

In France, The Business Climate Index for June was at 96, below the long-term average and consensus expectations. (Reporting by Stefano Rebaudo, Editing by Andrew Cawthorne)