US President Donald Trump agreed yesterday to extend the deadline until July 9 for talks between Washington and the 27-nation bloc to produce a deal.

Germany’s 10-year yield rose 3 basis points (bps) to 2.60%, after dropping 6.5 bps on Friday.

Trading volumes today are expected to be thin, given that markets in the US and Britain are closed due to public holidays.

Money markets priced in the European Central Bank (ECB) deposit facility rate at 1.70% in December, up from 1.67% late on Friday.

It reached 1.55% after the ECB suggested in mid-April it could cut rates in response to a possible tariff-induced economic slowdown.

Money markets also indicated more than a 95% chance of an ECB rate cut in June and less than a 20% chance of a second easing move in July.

German 2-year government bond yields, more sensitive to ECB policy rates, were up 4 bps at 1.80% after falling 7 bps on Friday.

Italy’s 10-year yield rose 1 bp to 3.82%, after credit rating agency Moody’s on Friday upgraded its outlook on Italy to “positive”.

The spread between Italian and German yields – a market gauge of the risk premium investors demand to hold Italian debt – dropped 2.5 bps to 96.50.

It hit 90.90 bps last week, its lowest since February 2021.