02.06.202608:21:45UTC+00Bund Yields Drop as Oil Prices Ease

German 10-year Bund yields fell to 2.95%, partially retracing Monday’s eight-basis-point rise, as oil prices declined and markets digested mixed signals on efforts to end the Middle East conflict. Uncertainty increased after US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu offered differing accounts of a phone call about the fighting in Lebanon. Trump said he had pressed both sides to stop hostilities, while Netanyahu’s summary was notably less explicit.

The confusion followed reports that Iran had suspended negotiations with the US, demanding an end to the Lebanon clashes as a condition for any broader agreement. Trump, however, maintained that talks with Tehran were progressing rapidly.

Investors are now focused on May’s flash Eurozone inflation figures for clues on the economic fallout from the Iran-related tensions. The release comes ahead of next week’s ECB meeting, where money markets are assigning a 95% probability to a 25-basis-point rate increase. Markets anticipate a total of two such hikes this year, with a non-negligible chance of a third.