Germany’s 10-year Bund yield rose back above 3.5%, returning to levels last seen in mid-2009, as oil prices rebounded amid uncertainty over US-Iran talks and investors digested stronger-than-expected PMI data. Eurozone private-sector activity expanded in September at its fastest pace in nearly three and a half years, bolstering expectations that the European Central Bank may deliver additional interest rate hikes this year.
ECB official Joachim Nagel noted on Tuesday that oil prices are becoming an increasingly important consideration in monetary policy and signaled that further tightening remains possible. At the same time, Chief Economist Philip Lane cautioned that another spike in energy prices could keep eurozone inflation elevated for longer than anticipated.
In the US, investors stepped up wagers on additional Federal Reserve rate increases after a series of hawkish remarks from policymakers and stronger-than-forecast PMI readings.
