FX.co ★ Germany’s 10-Year Bund Yield Rises on Inflation Fears

Germany’s 10-year Bund yield rose to 2.66% at the start of March, rebounding from a four-month low, as escalating tensions in the Middle East unsettled global markets and led investors to scale back expectations for interest rate cuts by major central banks amid renewed inflation worries. Over the weekend, the US and Israel launched strikes on Iran, reportedly killing Iran’s Supreme Leader and effectively closing the Strait of Hormuz, which triggered a retaliatory barrage of missiles and drones from Iran. The resulting spike in oil and gas prices has intensified concerns over a resurgence of inflationary pressures across Europe. The region remains especially exposed, with gas storage levels unusually low and significant replenishment required before next winter. At the same time, German retail sales fell 0.9% in January, a steeper decline than the 0.2% drop forecast. Investors are now focused on key European data releases this week, including Eurozone CPI figures and Germany’s factory orders report.