Eurozone sovereign bond yields fell sharply on Wednesday as the US trade war with China escalates.
Washington imposed a 10% tariff on a wider list of Chinese imports to the tune of $200bn, as officials failed to negotiate a trade détente on Tuesday. Thousands of Chinese imports will be affected, affecting US value chains that depend on Chinese parts. China is bracing for comparable retaliatory measures.
US Treasuries also benefitted, as is often the case in periods of perceived crisis. Growth projections and employment remain strong in the US despite the ongoing trade war with the EU, Canada and China. However, US stocks are sliding.
Germany is selling existing issues, accommodating investors seeking a safe-haven investment. Bonds across the Eurozone fell by 2 to 3 basis points, including Italy.
Italian bonds have been under considerable pressure as the new government was originally thought to be contemplating a “Plan B” of leaving the Eurozone. The government has since denied there is any consideration to this effect.