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Euro zone yields fall, markets boost bets on ECB rate cuts after US tariff announcement

BY Reuters | ECONOMIC | 04/03/25 02:28 AM EDT

April 3 (Reuters) - Euro zone government bond yields dropped and markets increased their bets on future European Central Bank rate cuts on Thursday as the tariff announcement by U.S. President Donald Trump increased fears of a trade war which would hurt global growth.

Money markets priced in an 80% chance of a 25 basis points (bps) ECB rate cut in April, and a depo rate at 1.82% in December from around 1.9%.

Trump on Wednesday unveiled sweeping global tariffs of at least 10% on goods imported from most U.S. trading partners.

The benchmark German 10-year yield dropped nearly 8 basis points to 2.648% its lowest since early March.

Germany's 2-year yield, which is more sensitive to ECB policy rates, fell 8.5 bps to 1.958%, its lowest since December 12.

(Reporting by Stefano Rebaudo, editing by Alun John)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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