EUR/USD Rallies Above 1.12 on Spike in Bund Yields

The U.S. dollar slumped against the euro and Swiss franc on Tuesday after a spike higher in German Bund yields overshadowed a similar rise in U.S. Treasury yields and generated demand for the European currencies.

German 10-year Bund yields shot up 22 basis points from Monday’s session low of 0.52 percent to a session high of 0.74 percent on Tuesday. While benchmark 10-year U.S. Treasury yields hit six-month highs of 2.37 percent, analysts said traders were more alarmed by the move in Bund yields.

The European Central Bank’s 1 trillion-euro stimulus program had driven European rates lower, with German 10-year Bund yields threatening to slip into negative territory as recently as last month after hitting a record low of 0.05 percent on April 17.