European government bonds experienced modest declines on Wednesday as investors awaited substantial developments regarding the Iran conflict. Market movements remained contained within a narrow range, largely unaffected by the possibility of a two-week extension to the U.S.-Iran ceasefire.

The yield curve steepened in a bearish flattening pattern, with two-year bond yields in Germany, France, and Italy showing little change. The 2-year to 10-year yield curve steepened by 2-3 basis points.

Longer-dated UK gilts recorded the most significant losses, with the 30-year gilt yield rising by 4 basis points. Market participants increased their bets on the Bank of England tightening monetary policy, now pricing in a cumulative 40 basis points of rate hikes by December.

Since the outbreak of the Iran war, bond performance has remained closely tied to energy prices, which also saw minor fluctuations on Wednesday. Brent crude oil prices rose by 0.6%.

Market data: - German 10-year bond yield increased by 2 basis points to 3.04%; - German bond futures fell 4.00 points to 125.28%; - Italian 10-year bond yield rose by 3 basis points to 3.81%; - The Italy-Germany bond yield spread widened by 2 basis points to 77 basis points; - French 10-year bond yield increased by 2 basis points to 3.68%; - UK 10-year gilt yield rose by 3 basis points to 4.81%.