FX.co ★ Bund Yield Hits Highest Level Since 2009

Germany’s 10-year Bund yield climbed further to 3.58%, its highest level since mid-2009, as elevated oil prices and stronger economic data reinforced expectations of additional monetary tightening by the European Central Bank. Brent crude rose back above $105 a barrel, with escalating tensions in the Middle East dimming hopes for a diplomatic resolution to the US-Iran conflict. At the same time, German business sentiment improved more than anticipated in September, reaching its strongest level in over three years, following better-than-expected PMI figures released on Wednesday. Eurozone private-sector activity also expanded at its fastest pace in nearly three and a half years. Money markets are now pricing in at least one 25-basis-point ECB rate hike by year-end, and assigning roughly a 40% probability to a second increase. In the US, investors likewise raised their expectations for further Federal Reserve rate hikes after hawkish remarks from policymakers and stronger-than-expected PMI data.