Germany’s 10-year Bund yield climbed to 3.198%, nearing the 15-year high above 3.2% reached in July, as rising oil prices rekindled inflation concerns. Tougher demands on Iran from US President Donald Trump have dimmed the prospects for an agreement to reopen the Strait of Hormuz, driving crude prices higher and adding to inflationary pressures. Trump has called for compensation from Tehran, while Iran continues to press for reparations as part of negotiations to end the conflict.
At the same time, the European Central Bank kept interest rates unchanged in July, following a 25-basis-point hike in June—its first increase in three years. German government bonds have outperformed US Treasuries as investors increasingly favor European markets, supported by improving economic momentum and greater clarity on ECB policy. Mounting concerns over the uncertainty surrounding Federal Reserve policy and the US fiscal outlook are further enhancing the relative appeal of European bonds.
