FX.co ★ German Bund Yields Rebound as Oil Rises and ECB Signals Further Tightening

Germany’s 10-year Bund yield rose to 2.95%, rebounding from the three-month lows hit earlier this week, as higher oil prices and hawkish signals from European Central Bank officials pressured bond markets. Crude prices advanced after planned US-Iran peace talks in Switzerland were abruptly canceled, casting new doubt on the durability of the tentative weekend agreement to end the Middle East conflict.

On the monetary policy front, ECB officials reiterated a firm, anti-inflation stance. Governing Council member Pierre Wunsch indicated that another rate hike could come as early as next month if price pressures broaden, while ECB Chief Economist Philip Lane argued that the euro-area economy may be able to absorb higher borrowing costs. Money markets are now pricing in at least one additional ECB rate increase this year, after this month’s 25-basis-point move, which raised the deposit rate to 2.25% and marked the first hike since 2023.