Germany’s 10-year Bund yield slipped to 3.15% on Friday, mirroring a pullback in oil prices as energy supplies continued to flow through key maritime routes despite limited progress in US–Iran negotiations. Nevertheless, the benchmark yield rose by 28 basis points in July, marking its largest monthly increase since March. The two-year Bund yield also advanced by more than 22 basis points, as mounting worries over the longer-term inflationary fallout from the Middle East conflict led investors to step up bets on additional ECB rate hikes.
Money markets now fully price the European Central Bank’s deposit rate at 2.75% by early 2027, following stronger-than-expected euro area GDP data and persistent inflation pressures. Having raised interest rates in June and then held them steady in July, the ECB is now anticipated to deliver two further rate increases, with the first potentially as soon as September.
