FX.co ★ Bund Yields Rise Above 3.6% as Rate-Hike Bets Build

Germany’s 10-year Bund yield has climbed back above 3.6%, its highest level since June 2009, posting a seventh straight weekly increase. The move reflects mounting worries that elevated energy prices could reignite inflationary pressures, while increasingly hawkish signals from central banks push up interest-rate expectations. Money markets now imply roughly 100 basis points of additional ECB rate hikes by late 2027.

Investors in the US and UK have similarly raised their expectations for further monetary tightening following hawkish remarks from policymakers and data indicating resilient economic growth. At the same time, concerns about debt sustainability in heavily indebted countries—particularly France and Italy—have added pressure on European sovereign bonds ahead of next year’s elections.

On the data front, German consumer sentiment deteriorated more sharply than anticipated heading into October, with higher energy costs weighing on households’ income expectations.