Bund Yield Nears 15-Year High as ECB Rate Hike Looms

Germany’s 10-year Bund yield held just below 3.4%, its highest level since April 2011, as investors braced for Thursday’s European Central Bank policy meeting. Policymakers are widely expected to raise interest rates while maintaining their data-dependent approach, with the ongoing war involving Iran adding to uncertainty over the inflation outlook. Brent crude briefly reached $100 a barrel for the first time since July 24, while European natural gas prices climbed to fresh three-and-a-half-year highs as escalating tensions in the Middle East heightened concerns over energy supplies and renewed inflationary pressures. Markets are now pricing in two ECB rate hikes in 2026, with the deposit rate seen reaching 3% by late 2027. A Reuters poll published on September 3 indicated that the ECB was expected to raise rates on Thursday for a second time before bringing what would be its shortest rate-hiking cycle in 15 years to an end.

Germany 10 Year Government Bond Yield increased to 3.40%, the highest since April 2011. Over the past 4 weeks, Germany 10Y Bond Yield gained 21.77 basis points, and in the last 12 months, it increased 73.00 basis points.

Germany’s 10-year Bund yield rose to 3.4%, touching its highest level since April 2011, as surging energy prices heightened inflation concerns ahead of this week’s European Central Bank meeting. Brent crude neared $100 a barrel, while European natural gas prices climbed to their highest level since late 2022 amid renewed tensions in the Middle East and reports that Iran and Oman were nearing an agreement to manage shipping through the Strait of Hormuz. Higher energy prices have intensified a global bond selloff, while persistent inflation pressures and resilient economic growth are keeping central banks under pressure to maintain a restrictive policy stance. The ECB is widely expected to raise interest rates on Thursday, with markets almost fully pricing in another hike by year-end. In the US, investors are awaiting key inflation data later this week, after Friday’s strong jobs report lifted the probability of a Fed hike next week to nearly 60%.