FX.co ★ Bund Yields Head for Monthly, Quarterly Drop

Germany’s 10-year Bund yield inched up to 2.88% at the end of June, trading just above a four-month low. Despite the slight uptick, it remained on course for a 5 bps decline over the month and a 12 bps drop for the quarter. The move came as oil prices retreated from recent highs following the US–Iran ceasefire, which reopened the Strait of Hormuz and eased inflation worries.

This moderation in inflation concerns led markets to scale back expectations for the extent of future interest rate hikes by the ECB and the Bank of England. In contrast, the Federal Reserve maintained a hawkish tone, signaling the possibility of further US rate increases later this year.

Investors also closely monitored the ECB’s Sintra Forum and a series of inflation releases from Europe’s largest economies. The key event was Wednesday’s panel featuring ECB President Christine Lagarde, as markets looked for clues on the central bank’s economic assessment and policy outlook. Incoming data showed that price pressures eased in Germany and France in June, while inflation in Spain remained close to its highest level in nearly two years.