Euro yields stabilize after Trump-Iran talk announcement; short-dated notes dip

Eurozone government bond yields stabilized Monday, with short-dated borrowing costs dipping as a sharp decline in crude oil prices relieved inflationary pressure following a diplomatic breakthrough in the Middle East. The two-year German yield fell to 2.766%, while the 10-year Bund held at 3.155%, after Trump announced direct talks with Iran were scheduled for Monday and halted a planned strike to pursue reopening the Strait of Hormuz — triggering a more than 4% drop in oil prices. This follows a rough July where German yields surged ~30bps to 15-year highs near 3.21%. Eurozone Q2 GDP beat forecasts at 0.4% growth, while July core inflation accelerated to 2.5%, keeping markets pricing further ECB tightening at the Sept. 10 meeting.