Eurozone yields rise as Donald Trump adds new tariffs

Eurozone bond yields jumped as U.S. President Donald Trump imposed tariffs on exports from multiple countries, adding pressure on inflation and reshaping expectations for central bank policy.

Trump's new tariffs, though less severe than initially expected, took effect on Friday, targeting exports from Canada, Brazil, India, and Taiwan. The move reinforced concerns about inflation staying elevated, especially in the euro zone. 

The rise in yields came amid a broader sell-off in global long-term debt, as markets adjusted to the view that interest rates are likely to stay higher for longer.

German 30-year bond yields rose four basis points in early trading to 3.22%, in line with gains in U.S. Treasuries. Italy's 30-year yields climbed nearly 7 bps to 4.464%, and France's advanced 4 bps to 4.177%. 

Analysts said bond markets were reacting to the reduced likelihood of major rate cuts. "The long-end in Bunds continues to lack clear direction despite abundant data points, as larger surprises remain absend. The front-end on the other hand weakened, as the figures add conviction to the ECB's base case scenario, leaving curves flatter as markets are increasingly pricing a terminal rate closer to 2%," Commerzbank analysts said. 

Additional data released Friday included final euro zone manufacturing figures for July and the closely watched U.S. monthly jobs report, both seen as key inputs for future monetary policy decisions. 

Shorter-term debt was less affected: Germany's two-year Schatz yield ticked up just 1bp to 1.956%, slightly below last week's four-month high. 

Traders have been pulling back expectations of another rate cut by the European Central Bank this year. The broader market consensus is beginning to shift toward the next potential move being a hike, likely in 2026. 

The 10-year German Bund yield, a benchmark for the region, rose 3.2bps to 2.724%, capping a third straight monthly gain and its biggest jump since March's 34-bp surge. 

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