Germany’s 10-Year Bund Yield Rises on Inflation Fears

Germany’s 10-year Bund yield climbed to 2.66% at the start of March, up from a four-month low, as escalating tensions in the Middle East rattled global markets and investors scaled back expectations for interest rate cuts by major central banks amid renewed inflation concerns. Over the weekend, the US and Israel carried out strikes on Iran, resulting in the reported death of Iran’s Supreme Leader and the effective closure of the Strait of Hormuz, and prompting Iranian missile and drone retaliation. A sharp surge in oil and gas prices has stoked fears of renewed inflationary pressures across Europe. The region remains particularly vulnerable, with gas inventories at unusually low levels and substantial replenishment required before next winter. Meanwhile, German retail sales fell 0.9% in January, exceeding expectations for a 0.2% decline. Investors are also eyeing key European economic releases this week, including Eurozone CPI data and Germany’s factory orders report.

Germany’s 10-year Bund yield fell to 2.68%, its lowest level since late November, as investors assessed recent inflation figures and their implications for European Central Bank policy. Germany’s EU-harmonized inflation rate slowed to 2.0% in February, coming in just below the 2.1% consensus and aligning with the ECB’s target. Meanwhile, France’s HICP quickened to 1.1% from 0.4% in January, exceeding the 0.7% forecast. In Spain, HICP increased to 2.5%, topping both the previous month’s 2.4% and expectations of 2.3%. Money markets currently price in only a 30% chance of an ECB rate cut by December. Speaking to the European Parliament on Thursday, ECB President Christine Lagarde said headline inflation is expected to approach the 2% target over the medium term, with food inflation, key to consumer perception, projected slightly above 2% later this year. She also emphasized that the ECB will monitor currency movements but has no plans for direct intervention in foreign exchange markets.

Germany 10 Year Government Bond Yield decreased to 2.70%, the lowest since November 2025. Over the past 4 weeks, Germany 10Y Bond Yield lost 17.41 basis points, and in the last 12 months, it increased 28.37 basis points.