Germany’s 10-year Bund yield hovered around 3.25%, close to its highest level since March 2011, as investors weighed mounting inflation risks, increased public spending, and higher energy costs. Oil prices traded near three-week highs, while European natural gas prices rose to their highest level since January 2023 amid supply disruptions linked to the Middle East, reinforcing concerns that inflationary pressures may prove persistent.
Eurozone inflation accelerated to 2.9% in July, remaining well above the European Central Bank’s 2% target and bolstering expectations that policymakers may need to maintain a tighter monetary stance for an extended period. Higher energy prices risk further complicating the ECB’s efforts to return inflation to target, especially if supply constraints continue.
German government bonds also tracked the broader global fixed-income selloff, as US Treasury yields climbed and the initial support from the US Treasury’s expanded buyback programme began to fade.
