Weak PMI data from the Eurozone and the United Kingdom initially provided a boost to bonds; however, bonds subsequently weakened as escalating tensions between the United States and Iran drove oil prices higher.
Business activity in the Eurozone contracted at its fastest pace in over two years, heightening market concerns that the conflict with Iran and the resulting surge in energy costs are severely impacting the regional economy. Meanwhile, business output in the United Kingdom declined for the first time in over a year.
The yield on Germany's 2-year government bond initially fell by 3 basis points to 2.63% but later rebounded to 2.70%. The deadlock between the United States and Iran on key issues has pushed oil prices higher, intensifying market fears about inflation and the prospect of interest rates remaining elevated for an extended period.
Reports indicating that Tehran plans to retain its uranium stockpile are viewed as a potential obstacle to reaching any peace agreement.
UK government bonds outperformed, with the 2-year yield rising by only 1 basis point to 4.38%, while the 10-year yield fell by 2 basis points to 4.97%.
Market Data: - Germany's 10-year government bond yield remained stable at 3.10%. - German government bond futures rose by 13.00 points to 124.86%. - Italy's 10-year government bond yield increased by 2 basis points to 3.84%. - The yield spread between Italian and German government bonds widened by 1 basis point to 74 basis points. - France's 10-year government bond yield rose by 2 basis points to 3.73%. - The 10-year UK government bond yield decreased by 2 basis points to 4.97%.
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