FX.co ★ Bund Yields Hit 17-Year High as ECB Hike Bets Build

Germany’s 10-year Bund yield climbed to 3.55%, its highest level since June 2009, as investors increased bets on further European Central Bank interest rate hikes amid renewed inflation concerns and ahead of today’s US Federal Reserve decision. Markets now expect the ECB deposit rate to reach around 2.9% by December, up from the current 2.5%. Looking further ahead, the rate is projected to rise to 3.4% by November 2027, fully pricing in a third hike and implying roughly a 50% probability of a fourth. The ECB raised rates last week for the second time this year in an attempt to contain inflation driven by higher energy costs, while cautioning that price pressures could prove persistent. Those comments have reinforced expectations of additional tightening. Meanwhile, US policymakers are widely anticipated to raise rates by 25 basis points later today—marking the first increase in three years—with markets also seeking guidance on the likelihood of further hikes.