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Investing.com -- The 10-year German Bund yield has limited room to decline in the coming months as European Central Bank rate cuts approach their end, according to UniCredit’s Investment Institute.
Luca Cazzulani, head of strategy at the institute, noted in a report that markets are already pricing in the conclusion of the ECB’s interest-rate cutting cycle.
For 10-year yields to fall significantly, the ECB would need to adopt a more dovish stance, which would likely stem from deteriorating economic sentiment, Cazzulani explained.
If the ECB’s terminal deposit rate reaches 1.50%, the 10-year Bund yield could drop to 2.40%, according to the strategist. Alternatively, if the terminal rate settles at 2.00% - indicating no further rate cuts - this would align with 10-year yields around 2.80%.
The 10-year Bund yield currently stands at 2.720%, up 1.6 basis points, according to Tradeweb data.
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