Bund Yields Turn Positive For First Time In 3 Years, USTs Bounce Off Critical Support Bund Yields Turn Positive For First Time In 3 Years, USTs Bounce Off Critical Support German 10Y yields climbed above zero for the first time since May 2019 just as money markets brought forward bets on a 10-basis-point European Central Bank rate hike to September from October previously. Traders expect that by the end of next year, the policy rate will no longer be negative. But, as Bloomberg''s Ven Ram notes, the key things to watch out for will be how sustainable the move is, how much of a tightening in financial conditions the ECB will tolerate (it may yet take a sanguine approach if Treasury yields continue to trek higher) and where the near-term top for yields is (my expectation is around 0.15%-0.20% -- though this isnt a year-end target). It would be a surprise if the ECB were to allow bund yields to climb all the way to where they need to be. Notice also that the 10-year swap rate is around 0.41%, closer to the implied level on bunds. However, the two-year yield is still trailing the benchmark deposit rate.