FX.co ★ German Bund Yields Ease, but Remain Close to 17-Year Highs

Germany’s 10-year Bund yield slipped to 3.57% at the end of the week, after briefly climbing above 3.6% for the first time since June 2009. The retreat came as oil prices pulled back from a two-day rally amid reports that the US and Iran were considering a phased deal that could reopen the Strait of Hormuz and ease the US blockade on Iranian ports. Even so, the US–Iran standoff and recent energy-price moves continue to stoke worries about a resurgence in inflation. Money markets are now pricing in around 100 basis points of additional rate hikes by the end of October 2027. In the US, investors similarly increased their wagers on further Federal Reserve tightening, following hawkish remarks from policymakers and data signaling resilient economic growth and a robust labor market. At the same time, German consumer sentiment deteriorated more sharply than anticipated heading into October, as higher energy costs weighed on households’ income expectations.