Germany’s 10-year Bund yield climbed to 2.93%, posting its first weekly increase since early June with a rise of nearly 9 basis points. The move came as traders reversed positions after the initial decline in yields triggered by the US–Iran deal. At the same time, a rise in long-term Japanese yields—driven by concerns over higher government spending—added further upward pressure on German yields.
Even so, European bond yields remain well below the multi-year highs reached in May. The pullback has been supported by lower crude oil prices, weaker-than-expected inflation data, and dovish remarks from ECB President Christine Lagarde, all of which have led markets to trim expectations of a third ECB rate hike this year. Money markets, however, still see a second rate increase as more likely than not.
June inflation came in softer than forecast, with headline inflation easing to 2.8% and core inflation slowing to 2.4%. Speaking at the ECB’s Sintra Forum, Lagarde said that risks to both inflation and growth in the euro area had become more balanced. In parallel, a weaker-than-anticipated US payrolls report further reduced expectations of an imminent rate hike by the Federal Reserve.
