The market is in a wait-and-see mode. The yield spread of Eurozone bonds may widen.

In a report, Rainer Guntermann of Deutsche Bank stated that the tensions in the Strait of Hormuz have escalated again, following a substantial relief rally in the markets on Friday, causing the market to adopt a wait-and-see attitude. The interest rate strategist indicated that this rally may reverse, potentially resulting in a flattening yield curve where short-term interest rates rise faster than long-term rates. He mentioned that the yield spread between Eurozone government bonds and credits may widen again, and the ends of the asset swap spread curve could steepen before the ceasefire deadline late Tuesday night, unless there are more tangible signs of a possible agreement in the coming days.