FX.co ★ Germany’s 10-Year Bund Yield Nears 2011 High

Germany’s 10-year Bund yield climbed toward 3.05%, approaching its highest level since 2011, as rising tensions in the Strait of Hormuz intensified inflation fears and bolstered expectations of further interest rate hikes by the European Central Bank. Hopes for a US-led diplomatic breakthrough have faded following the collapse of a two-week ceasefire and the failure to revive negotiations between Washington and Tehran. Investor sentiment has turned more cautious, with money markets now fully pricing in two 25-basis-point ECB rate increases in 2026 and assigning a 55% probability to a third hike by the end of the year. On the data front, Germany’s Ifo Business Climate Index slipped to 84.4 in April, its lowest reading since May 2020 and below the consensus forecast of 85.5, reinforcing worries that the Middle East conflict is further weighing on Germany’s already fragile economic recovery.