Euro Zone Bonds Steady Amid US-Iran Peace Talk Prospects

Euro zone government bonds held steady on Tuesday as traders kept a close eye on potential peace talks between the U.S. and Iran while awaiting a Senate confirmation hearing for Kevin Warsh, President Donald Trump's nominee to lead the Federal Reserve.

Bond markets experienced volatility in March and early April due to headlines concerning the Middle East conflict. Investors were anxious about consistently high energy prices potentially prompting central banks to tighten monetary policy to curb inflation. On Tuesday, there were few updates, but the U.S. expressed optimism about talks in Pakistan, and an Iranian official mentioned the possibility of Tehran joining, despite uncertainty and challenges as a ceasefire neared its end.

Germany's 10-year yield, a euro zone benchmark, remained stable at 2.97%, with changes in the short and long ends of the curve. German investor morale hit a three-year low, and ECB Vice-President Luis de Guindos cautioned on the impact of rising oil and gas prices. Investors remain skeptical about an ECB rate hike soon but anticipate a 25-bp increase by June, pricing in further rises by year-end.