Rates Monthly March 2025 : $ and € rates... a new regime

In addition to geopolitical and trade tensions, fiscal policy is now one of the main drivers of interest rates, especially on the EUR side. The implications of Germany’s policy shift are profound, with rising supply, higher term premiums, and a steeper yield curves now firmly in play.  Against this backdrop, Bund yields are likely to reach 3% in the medium term, while swap and sovereign spreads continue to tighten. The ECB’s ability to cut rates aggressively is increasingly constrained, reinforcing our view that odds of a comeback to an era of ultra-low European yields are quickly fading.