FX.co ★ German Bund Yields Slide to Three-Month Lows

Germany’s 10-year Bund yield fell toward 2.9%, its lowest level since March 17, as traders dialed back expectations for additional European Central Bank rate hikes. The reassessment follows a continued drop in oil prices, driven by mounting expectations of a US-Iran agreement this week. Crude has slumped to new three-month lows, though it remains above pre-conflict levels of around $65 per barrel, with oil supplies still far from normal.

Money markets are now pricing in less than 30 basis points of further ECB tightening this year—roughly equivalent to a single rate increase. Still, ECB policymaker Gediminas Šimkus said on Wednesday that upside risks to inflation continue to warrant more tightening, and he expects at least one additional rate hike to firmly anchor inflation expectations.