Germany 10-Year Bond Yield Remains at 3%

Germany’s 10-year Bund yield hovered around 3%, staying close to the 15-year highs reached earlier this month, as persistent inflation concerns continued to anchor borrowing costs at elevated levels. Tensions between the US and Iran escalated after the US Navy fired upon and boarded an Iranian-flagged cargo ship. This reversal came swiftly: on Friday, Iran had stated the strait would remain fully open to commercial traffic during the 10-day ceasefire between Israel and Lebanon. Also, there is no clarity on whether US and Iranian officials will meet ahead of the expiry of the 14-day ceasefire between the two countries on Tuesday. Meanwhile, the ECB is set to decide later this month, with no changes in borrowing costs expected at this meeting. Instead, focus remains on the June meeting, although the evolving situation in the Middle East could alter the outlook. On Friday, the IMF said it expects the ECB to raise rates by around 50bps in 2026 to maintain a neutral policy stance.

Germany’s 10-year Bund yield hovered around 3%, staying close to the 15-year highs reached earlier this month, as persistent inflation concerns continued to anchor borrowing costs at elevated levels. Optimism over diplomatic progress in the US–Iran conflict has done little to ease pressure on bond markets, with investors still demanding a higher risk premium amid ongoing uncertainty and expectations of further ECB rate hikes. Reports indicate that the US and Iran are considering a two-week extension of the ceasefire to allow more time for negotiations, with a second round of talks expected soon. This has helped ease oil prices from their recent peaks. Against this backdrop, markets are now pricing in two 25bps rate hikes by the ECB this year, down from three expected just a few weeks ago. Earlier in the week, ECB President Lagarde acknowledged that elevated energy costs have pushed the eurozone off its baseline economic trajectory, but did not indicate any immediate rate action.

Germany’s 10-year Bund yield edged higher toward 3.05%, close to 15-year highs, as stubborn inflationary pressures overshadowed optimism from US-Iran peace talks. While mediators reported progress in extending the ceasefire, with both sides agreeing in principle to continue negotiations on Tehran’s nuclear program, the Strait of Hormuz, and war reparations, uncertainty persists after the US announced plans to deploy 10,000 more troops to the region. Though the prospect of dialogue pushed oil prices below $100 per barrel and boosted risk sentiment, elevated energy costs continue to drive inflation. Markets now anticipate at least two ECB rate hikes by year-end. On Tuesday, ECB President Christine Lagarde noted that higher energy costs have deviated the eurozone from its baseline economic outlook but did not indicate immediate rate action.