Germany’s 10-year Bund yield climbed to 3.15%, nearing a two‑month high, as a sharp rise in oil prices strengthened expectations that the European Central Bank will implement two additional rate hikes by early 2027. The two-year Bund yield, which is particularly sensitive to interest rate expectations, advanced above 2.8%, its highest level since July 2024.
Brent crude surpassed $90 per barrel, the highest level in more than a month, as intensifying tensions between the United States and Iran raised the risk of disruptions to oil shipments through the Strait of Hormuz, stoking renewed inflation concerns.
Money markets now anticipate that the ECB’s deposit facility rate will reach 2.70% by December and 2.78% by February 2027, up from the current 2.25%. The first hike is expected as early as September. Investors are now focused on Thursday’s ECB policy meeting, where policymakers are widely expected to keep rates on hold and maintain a wait‑and‑see approach after June’s first rate increase in three years.
