Germany’s 10-year Bund yield eased to around 3.25%, down from Wednesday’s 3.2625%, as falling oil prices helped alleviate concerns about stubbornly high inflation. Brent crude was on track for its first daily decline in six sessions, easing immediate pressure on inflation expectations in Europe.
Eurozone consumers also became slightly less worried about rising prices, with inflation expectations for the next 12 months edging down to 2.9% in July from 3% in June. Even so, inflation remains well above the ECB’s 2% target, keeping the possibility of further monetary tightening in play following the central bank’s June rate hike.
Investors are also digesting the recent volatility in global bond markets, which has been fuelled by concerns over inflation and increased government spending. At the same time, Eurozone business activity continued to grow in August: manufacturing showed a particularly strong rebound, led largely by Germany, while growth in the services sector remained modest.
