FX.co ★ Bund Yields Rise on Hormuz Uncertainty

German 10-year Bund yields inched up to 3.25% as the recent slide in oil prices stalled, amid continuing uncertainty over a potential agreement to reopen the Strait of Hormuz and mixed signals from Iran. Qatar’s prime minister is scheduled to visit Tehran on Thursday in an effort to revive US-Iran diplomacy, with both parties still at odds over control of the strategically vital waterway. In money markets, traders are now pricing in slightly more than 40 basis points of additional ECB tightening by year-end, with a September rate increase almost fully anticipated. According to Reuters, ECB policymakers are prepared to raise rates at their September meeting to limit the economic fallout from the Iran war, but remain reluctant to signal any further tightening beyond that. Eurozone bond yields hit multi-year highs last week as investors became increasingly concerned about the inflationary impact of higher energy prices and the rise in government spending.