Bonds: “Limited Room for Yield Declines”

Stock and commodity markets are reacting much more strongly to the Middle East peace deal than bond markets. Yields are treading water. Following a massive bond offering by Nvidia, SpaceX now also plans to tap the bond market.

June 19, 2026. FRANKFURT (Deutsche Börse). Markets have calmed down following the framework agreement between the U.S. and Iran: The price of oil has fallen significantly, with a barrel of Brent trading below $80 as of Friday afternoon. Concerns about inflation and interest rate hikes have eased noticeably.

However, the decline in yields following the agreement was short-lived. On balance, yields have barely changed week-over-week: Ten-year German government bonds are currently yielding 2.97 percent again. A week ago, the yield was 2.98 percent. “The easing inflation concerns are offset by governments’ extremely high capital needs,” notes Arthur Brunner, who trades bonds for ICF Bank.

“Budget deficits that are far too high”

Commerzbank does not expect yields to fall significantly beyond today. “In the short term, yields may continue to decline as the Middle East conflict gradually fades into the background. But looking ahead to the next six to twelve months, the scope for further declines in yields is limited,” explains Chief Economist Jörg Krämer. He, too, believes that the prospect of key interest rate cuts in the second half of next year will be largely offset by the budget deficits in most countries, which are far too high.

“Warsh Wants to Be a Credible Fighter Against Inflation”

The U.S. Federal Reserve, under its new chairman Kevin Warsh, left key interest rates unchanged on Wednesday of this week. “Warsh has dashed hopes for an interest rate cut,” notes Tim Oechsner of Steubing AG. Warsh has made it clear that no monetary easing is on the horizon in the short term. Although he is generally considered open to the idea that technological advances and AI will ease inflationary pressures in the long term, his first Fed meeting showed that, as Fed chair, Warsh wants to be one thing above all else for now: a credible fighter against inflation. “In doing so, he is distancing himself—at least for now—from Donald Trump’s calls for interest rate cuts and positioning himself much closer to the Fed’s traditional stance.” The ECB had also left its key interest rates unchanged the week before. 

TPG Recovers After Price Shock

There is some activity in government bond trading at Steubing AG involving Italian bonds (IT0005425761) and Spanish bonds (ES0000012C12). Trading in corporate bonds is relatively quiet. “Right now, hardly anyone wants to take a position; there’s a lack of momentum,” reports Gregor Daniel of Walter Ludwig Wertpapierhandelsbank. Steubing trader Oechsner reports strong trading volumes for Volkswagen bonds maturing in 2027 with a current yield of 2.29 percent (XS2374595044) and Nestlé bonds maturing in 2029—denominated in euros—with a yield of 2.70 percent (XS1707075328).