The yield on Germany’s 10-year Bund slipped back below 3.3% as investors paused after a sharp rise in inflation worries and interest rate expectations in both the US and Europe earlier in the week. Stronger-than-expected US inflation data on Tuesday had pushed Treasury yields higher and strengthened expectations of further Federal Reserve rate hikes, triggering a sell-off that briefly spilled over into European bond markets before yields steadied.
In commodities, Brent crude hovered around $93 a barrel, remaining well below recent peaks, while European natural gas prices also fell amid increased supply from the Gulf and easing fears of a renewed escalation in the conflict.
On the monetary policy front, markets are assigning roughly an 80% probability to a 25-basis-point European Central Bank rate increase in December, with two hikes fully priced in by mid-2027. In the US, the latest inflation figures and hawkish signals from the Fed have bolstered expectations of a December rate move and opened the door to the possibility of a larger 50-basis-point increase.
