FX.co ★ Germany 10-Year Bund Yield Hovers at 3%

Germany’s 10-year Bund yield hovered around 3%, remaining close to the 15-year highs reached earlier this month, as persistent inflation concerns kept borrowing costs elevated. Hopes for diplomatic progress in the US–Iran standoff have done little to relieve pressure on bond markets, with investors still demanding a higher risk premium amid ongoing uncertainty and expectations of further ECB tightening.

According to reports, the US and Iran are considering a two-week extension of the ceasefire to allow more time for negotiations, with a second round of talks anticipated soon. This development has contributed to a pullback in oil prices from their recent peaks.

In this context, markets are now pricing in two 25 bps rate hikes by the ECB this year, down from three anticipated only a few weeks ago. Earlier in the week, ECB President Christine Lagarde acknowledged that elevated energy costs have pushed the eurozone off its baseline economic trajectory, but she stopped short of signaling any imminent policy move.