Euro zone government bonds edged higher on Wednesday as investors paused after a sharp selloff earlier this week driven by fears the Middle East war would fuel inflation.President Donald Trump had ordered
Euro zone government bonds edged higher on Wednesday as investors paused after a sharp selloff earlier this week driven by fears the Middle East war would fuel inflation.
President Donald Trump had ordered the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
"A U.S. insurance for ships passing through the Strait of Hormuz could be a game changer, if successfully implemented," said Mohit Kumar, an economist at Jefferies, noting that if Gulf countries were to join the conflict it would signal an earlier end to the war.
Iran has already launched several retaliatory strikes in the Gulf region.
"However, this would require a near complete destruction of Iran's naval capabilities and/or pressure from its allies including China to let the ships pass," Jefferies' Kumar added, arguing he sees the war continuing for at least a couple of weeks.
Germany's 10-year government bond yield DE10YT=RR, the euro area benchmark, rose 0.5 basis points to 2.78% after hitting 2.815% on Tuesday, its highest since February 11.
The country's two-year yield DE2YT=RR, more sensitive to policy expectations, fell 1 bp to 2.17%.
Money markets priced a 40% chance of a rate increase
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