FX.co ★ German Bund Yields Fall as Oil Drops Below $100

Germany’s 10-year Bund yield reversed an early advance to slip below 3.45% on Tuesday, its lowest level since September 9, extending a seven-basis-point decline from the previous session as oil prices resumed their downward trend. Brent crude dropped below $100 a barrel after reports suggested Iran could reopen the Strait of Hormuz if the United States lifted its blockade of Iranian ports.

Eurozone bond yields have climbed to multi-year highs in recent weeks, as fears of an energy-driven inflation shock have reinforced expectations of further interest rate increases. At the same time, investors are weighing the impact of elevated government debt and rising corporate borrowing, particularly to finance investment in artificial intelligence.

Political uncertainty is further clouding the outlook. Germany’s governing CDU suffered its worst-ever result in Mecklenburg-Western Pomerania, failing to secure a single seat and prompting some party members to call for Chancellor Friedrich Merz to resign after just 16 months in office.