European Bonds Rally as Trump Tariff Threat Fuels Rate-Cut Bets

European bonds rallied after US President Donald Trump threatened to apply levies of 50% on the region starting June 1, fueling bets policymakers will have to lower interest rates further to support the economy.

Money markets are pricing 65 basis points of additional easing from the European Central Bank in 2025, which implies three quarter-point reductions at the remaining five scheduled decisions is most likely. Traders favored just two cuts before Trump’s announcement.