German 10-Year Bund Yield Approaches 15-Year High

Germany’s 10-year Bund yield rose to 3.198%, approaching the 15-year high above 3.2% reached in July, as higher oil prices revived concerns over inflation. US President Donald Trump’s tougher demands on Iran have clouded prospects for an agreement to reopen the Strait of Hormuz, pushing crude prices higher and adding to inflationary pressures. Trump called for compensation from Tehran, while Iran has reiterated demands for reparations as part of negotiations to end the conflict. Meanwhile, the European Central Bank left rates unchanged in July after a 25-basis-point hike in June, its first increase in three years.

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.