FX.co ★ German Bund Yields Ease as Oil Prices Fall

Germany’s 10-year Bund yield slipped to around 3.5% as oil prices fell for a second consecutive session and investors continued to absorb the impact of yesterday’s Federal Reserve rate hike. Brent crude is trading near $105 a barrel after Saudi Arabia announced plans to restore roughly half of the capacity of its damaged East-West pipeline within days. The outlook for the Middle East remains uncertain, keeping oil prices elevated and complicating the task facing central banks as they attempt to contain inflation without putting undue pressure on economic activity. The Fed raised interest rates by 25 basis points—its first increase since July 2023—and signalled the likelihood of another hike later this year amid persistent inflationary pressures. Meanwhile, markets are pricing in at least one further ECB rate increase this year. The ECB raised rates for the second time in 2024 last week, citing renewed inflation risks stemming from higher energy prices.