German 10-Year Bund Yield Climbs for 3rd Session

Germany’s 10-year Bund yield rose to 3.1384%, extending gains for a third session and moving further away from a three-week low of 3.10% hit on August 5 as a deal to reopen the Strait of Hormuz remained elusive, keeping oil prices elevated. Iran’s Foreign Minister said an agreement with Oman to establish a shipping route through the strait was “very close,” but cautioned that it would not immediately restore shipping flows. On the monetary policy front, the European Central Bank left interest rates unchanged in July following a 25bps increase in June, its first hike in three years, while expectations of a near-term Federal Reserve rate hike eased following weaker-than-expected employment data.

Germany’s 10-year Bund yield rose to 3.148% on Friday, extending gains for a second session and moving further from Wednesday’s three-week low of 3.10%. The rise in yields came as higher oil prices revived concerns that persistent inflationary pressures could limit the scope for central banks to ease monetary policy. Investors remained cautious amid uncertainty over a lasting agreement to reopen the Strait of Hormuz, while Brent crude extended its gains for a second session following reports that Iran could restrict US and Israeli vessels from using the waterway and seek compensation from countries it considers hostile. The European Central Bank left interest rates unchanged at its July meeting after delivering a 25-basis-point hike in June, its first increase in three years, amid renewed energy-driven inflation pressures. Meanwhile, German industrial production rose more than expected in June, adding to signs that Europe’s largest economy could finally be gaining momentum.

Germany’s 10-year Bund yield hovered around 3.12% on Thursday, down more than 8 basis points this week as optimism over a potential Middle East diplomatic breakthrough boosted expectations of lower oil prices and reduced pressure on central banks to tighten policy further. Iran said it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising hopes for the resumption of energy flows, although a broader US-Iran deal remains uncertain. President Donald Trump said negotiations were ongoing and that he would “see what happens.” Lower energy prices have strengthened expectations that the European Central Bank will maintain a gradual approach to policy tightening, with markets pricing in one additional rate hike by year-end and a smaller probability of a second. Meanwhile, German factory orders rose more than expected in June, adding to evidence that Europe’s largest economy may finally be gaining momentum.