Bund Yields Climb to Two-Week High
Germany’s 10-year Bund yield rose towards 3.4%, reaching its highest level since late October, as investors increased bets on further European Central Bank interest rate hikes, while a rebound in equity markets this week reduced demand for safe-haven assets. ECB euro short-term rate (€STR) forwards now indicate that markets expect the deposit rate to rise from its current 2.5% to 3.25% by late 2027, up from 3% priced in last week. They also point to a rate of 2.74% by December 2026. Meanwhile, stronger-than-expected US inflation data released on Tuesday pushed Treasury yields higher and reinforced expectations of further Federal Reserve tightening. Markets are now fully pricing in a rate hike by December, with the possibility of a larger 50-basis-point increase also being considered. Adding to inflationary concerns, oil prices rebounded from more than two-month lows after US President Donald Trump said on Thursday that Washington did not need a deal with Iran.
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Germany’s 10-year Bund yield rose towards 3.4%, reaching its highest level since late October, as investors increased bets on further European Central Bank interest rate hikes, while a rebound in equity markets this week reduced demand for safe-haven assets. ECB euro short-term rate (€STR) forwards now indicate that markets expect the deposit rate to rise from its current 2.5% to 3.25% by late 2027, up from 3% priced in last week. They also point to a rate of 2.74% by December 2026. Meanwhile, stronger-than-expected US inflation data released on Tuesday pushed Treasury yields higher and reinforced expectations of further Federal Reserve tightening.
Markets are now fully pricing in a rate hike by December, with the possibility of a larger 50-basis-point increase also being considered. Adding to inflationary concerns, oil prices rebounded from more than two-month lows after US President Donald Trump said on Thursday that Washington did not need a deal with Iran.