Germany’s 10-year Bund yield has climbed back above 3.6%, its highest level since June 2009, as persistently high energy prices stoke fears of renewed inflationary pressures and hawkish central bank messaging lifts interest-rate expectations. Brent crude has risen above $106 a barrel amid fading optimism over progress in US–Iran negotiations. Tehran has said it will not soften its conditions for reopening the Strait of Hormuz after President Trump rejected its proposal. In an interview with Axios, Trump said Iran had “overplayed its hand” and that he expected talks to resume this week.
Money markets are now pricing in roughly 100 basis points of ECB rate hikes by late 2027. Investors in the US and UK have likewise increased their bets on further monetary tightening, following hawkish remarks from policymakers and economic data indicating resilient growth. At the same time, worries about debt sustainability in highly leveraged economies—particularly France and Italy—are adding to the pressure on European government bonds ahead of next year’s elections.
