German Bond Yields Rise as ECB Rate Bets Strengthen
Germany’s 10-year Bund yield rose back above 3.6%, near its highest level since June 2009, as a deepening energy shock strengthened expectations for further ECB rate hikes through 2027. French bond yields also surged to a fresh 18-year high after recording their biggest quarterly increase in nearly four decades, ahead of the government’s budget announcement. Expectations for higher ECB rates are pushing borrowing costs higher across the euro area, raising concerns over debt affordability in the bloc’s most indebted economies. Political uncertainty ahead of the 2027 elections is adding to concerns over their fiscal outlooks. Oil prices rose as investors weighed increased Middle East energy flows against the ongoing US-Iran impasse, keeping inflation risks in focus. Money markets are now pricing the ECB’s deposit rate at around 2.8% by December, implying one further 25-basis-point hike and a 24% chance of a second move. Markets also see the policy rate reaching around 3.4% by late 2027.
6%, near its highest level since June 2009, as a deepening energy shock strengthened expectations for further ECB rate hikes through 2027. French bond yields also surged to a fresh 18-year high after recording their biggest quarterly increase in nearly four decades, ahead of the government’s budget announcement. Expectations for higher ECB rates are pushing borrowing costs higher across the euro area, raising concerns over debt affordability in the bloc’s most indebted economies. Political uncertainty ahead of the 2027 elections is adding to concerns over their fiscal outlooks.
Oil prices rose as investors weighed increased Middle East energy flows against the ongoing US-Iran impasse, keeping inflation risks in focus. 8% by December, implying one further 25-basis-point hike and a 24% chance of a second move. 4% by late 2027.