German 10-year Bund yields rose to 3.04%, following US Treasury yields higher after stronger-than-expected US employment data bolstered expectations of tighter Federal Reserve policy. US nonfarm payrolls jumped by 172,000 in May, nearly double the consensus forecast of 85,000, prompting markets to fully price in a Fed rate hike by year-end.
At the same time, investors positioned for a likely European Central Bank rate increase next week, while tracking any potential progress in efforts to resolve tensions in the Middle East. Markets now see a 25-basis-point ECB hike at the June 11 meeting as almost certain, with two—and possibly three—rate increases anticipated over the course of the year.
The shift in expectations comes as euro-area inflation climbed to 3.2% in May, its highest level in more than two and a half years. Nonetheless, uncertainty persists after Eurozone GDP figures were revised to show a contraction in Q1 2026—the first decline since late 2022 and the sharpest since mid-2020.
