*

Bund yields rise amid easing trade tensions and

geopolitical

developments

*

ECB board member Schnabel warns against further rate cuts

due to

inflation risks

*

Economist Schmieding predicts slow euro zone growth amid

ongoing

trade uncertainties

By Stefano Rebaudo

May 12 (Reuters) - Euro area benchmark Bund yields hit a

fresh one-month high and markets reduced bets on European

Central Bank interest rate cuts on Monday as less severe trade

and geopolitical tensions eased concerns about economic growth.

Speaking after talks with Chinese officials in Geneva, U.S.

Treasury Secretary Scott Bessent told reporters the two sides

had agreed on a

90-day pause on measures

and that tariffs would come down by over 100 percentage

points to 10%.

On the geopolitical front, Ukrainian President Volodymyr

Zelenskiy said he would agree to meet Russian President Vladimir

Putin in Turkey on Thursday, while a fragile ceasefire held

between India and Pakistan.

Germany's 10-year yield, the euro area's benchmark,

rose 6.5 basis points (bps) at 2.62%, after hitting 2.631%, its

highest level since April 11.

Money markets priced in an ECB deposit facility rate of 1.75% by

year-end, returning a few bps above levels

seen in mid-April before the European Central Bank suggested it

was ready to cut rates in response to the potential adverse

economic impact of U.S. tariffs. They had indicated a deposit

rate below 1.55% on April 25 and at 1.67% late Friday.

Remarks from ECB board member Isabel Schnabel also supported a

reduction of bets on future rate cuts.

The ECB should

stop cutting borrowing costs

as turmoil in the global economy is fuelling price

pressures and inflation was at risk of exceeding the bank's 2%

target in the medium term, Schnabel said on Friday.

Here are the key calls on the trade war from Holger

Schmieding, chief economist at Berenberg: Trump will do deals;

the worst of his trade wars could be over within two months from

now; U.S. tariffs will likely stay significantly higher than

they were before Trump's second term.

"Trump's trade policy and the resulting uncertainty will

hurt the U.S. much more than most other countries," Schmieding

said in a research note.

He confirmed this view after the U.S.-China statement,

while also noting that the euro zone will experience a period of

very slow growth in the second quarter and early third quarter.

The German two-year yield, more sensitive to

European Central Bank policy rates, was up 9.5 bps at 1.84%.

Italy's 10-year yield rose 5.5 bps to 3.67%, leaving

the spread between Italian and German yields - a market gauge of

the risk premium investors demand to hold Italian debt - at 100

bps.