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Markets scale back bets on future ECB rate hikes after Trump remarks

BY Reuters | ECONOMIC | 03/23/26 08:00 AM EDT

March 23 (Reuters) - Euro area government bond yields sharply reversed their rise on Monday after President Donald Trump said he will order the U.S. military to postpone any strikes against Iranian power plants and energy infrastructure for five days. Trump said he has had good and productive conversations with Iran.

Expectations for an end of the Middle East conflict eased inflation fears and saw investors scale back their bets on future European Central Bank rate hikes.

Oil prices fell by over 13% after Trump's remarks.

Money markets priced in a depo rate at 2.69% by year-end , implying two ECB rate hikes and a 75% chance of a third tightening move, from 2.94% earlier in the session, implying 3 hikes and about a 70% chance of a fourth move.

Germany's 10-year government bond yield, the euro area's benchmark, was down 3 bps at 3.01%, after hitting 3.077% early in the session, its highest level since June 2011. (reporting by Stefano Rebaudo; Editing by Toby Chopra)

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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.

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