Eurozone government bond yields edge higher as Fed’s hawkish shift and US-Iran deal jointly impact markets

⑴ Eurozone government bond yields edged slightly higher on Thursday, as traders weighed the Federal Reserve’s hawkish turn against the US-Iran agreement to reopen the Strait of Hormuz. Brent crude futures traded at $78.12 per barrel, down around 1.8%, hovering near early March levels.⑵ The yield on Germany’s 10-year government bond rebounded slightly to 2.9261% after five consecutive days of declines, while the 2-year yield rose 2.9 basis points to 2.6128%.⑶ The Federal Reserve kept interest rates unchanged, but its quarterly forecast shows nine policymakers expect a rate hike before the end of 2026. The policy statement removed language suggesting a further rate cut may occur this year, prompting US short-term Treasury yields to surge.⑷ The Swiss National Bank announced it would keep rates unchanged, while the Bank of England will release its policy decision later in the day, with markets generally expecting it to hold steady. The European Central Bank raised rates last week, and the Bank of Japan followed earlier this week.