Germany’s 10-year Bund yield inched up to 3.36% on Monday, moving closer to last week’s more than 15-year high of 3.3951%, as investors stayed cautious following the far-right AfD’s strong showing in Saxony-Anhalt and ahead of this week’s ECB meeting. The AfD secured 44% of the vote, falling short of an outright majority but delivering a major setback to Chancellor Friedrich Merz’s conservatives.
At the same time, Brent crude prices approached seven-week highs after the US struck three Iranian oil tankers over the weekend, destroying one, while Tehran threatened to impose a new restricted zone outside the Strait of Hormuz. Rising energy prices have intensified a global bond selloff, with German borrowing costs climbing for a fourth consecutive week as persistent inflation and resilient economic growth keep central banks under pressure to tighten policy. The ECB is widely expected to raise interest rates on Thursday, and markets are pricing in roughly a 90% probability of at least one additional hike by year-end.