Germany’s 10-year Bund yield edged down to 2.76% on Wednesday, easing after a sharp rise earlier in the week sparked by concerns that the conflict in the Middle East could fuel inflation. Markets also weighed reports that Iran had indicated a willingness to discuss terms for ending the war following US-Israeli strikes, though Israeli officials have urged Washington to reject the proposal.
Persistently high energy prices are expected to keep inflation pressures elevated across Europe, reinforcing the European Central Bank’s hawkish policy stance. Data for February showed annual Eurozone inflation at 1.9% and core inflation at 2.4%, both exceeding expectations. As a result, markets now see roughly a 40% probability of an ECB rate increase by year-end, a sharp reversal from last week, when similar odds were placed on a rate cut.
