Germany’s 10-year Bund yield slipped to 3.05%, holding near its highest level since 2011, after the European Central Bank left interest rates unchanged as expected and oil prices retreated from recent four-year highs. The ECB kept all options open for its June meeting and beyond, stating that while recent data are broadly consistent with its inflation outlook, upside risks to inflation and downside risks to growth have increased. Money markets continue to price in roughly 75 basis points of additional tightening by the end of the year.
On the data front, Eurozone inflation rose to 3% in April, its highest reading since September 2023 and well above the ECB’s 2% target. At the same time, the bloc’s economy unexpectedly lost momentum in the first quarter, expanding by just 0.1%, as the conflict in the Middle East disrupted energy supplies. By contrast, Germany’s economy grew by a stronger-than-expected 0.3%, supported by firmer private and government consumption and a rebound in exports.
