The yield on 10-year German government bonds reached a 15-year high

The yield on 10-year German government bonds rose to 3.21% during trading on Thursday, July 23—the highest level since 2011, according to Bloomberg. Rising energy prices and heightened inflation expectations are prompting investors to factor further monetary tightening by the European Central Bank (ECB) into their forecasts, the agency reports.

Oil prices jumped 3–4% on Thursday following an attack by Yemeni Houthis on ships in the Red Sea and amid ongoing tit-for-tat strikes between the U.S. and Iran. Brent crude exceeded $98.4 per barrel, while WTI traded above $89.8 per barrel.

Yields on German bonds rose by three basis points ahead of the ECB meeting, at which analysts expect the central bank to keep its deposit rate at 2.25%. This will give the ECB time to assess the implications of the renewed conflict between the U.S. and Iran, according to Bloomberg. Traders are now fully pricing in two rate hikes of a quarter of a percentage point each through the end of 2026, he added. Inflation in the eurozone stood at 2.8% year-over-year in June, slowing from 3.2% in May. Core inflation, which excludes volatile food and energy prices, also slowed more than expected.

The possibility of a “surprise rate hike” at Thursday’s meeting cannot be ruled out entirely, said ING Groep NV strategist Francesco Pesole in a Bloomberg report. “A renewed escalation in the Middle East and rising European gas prices, which are outpacing oil prices, should keep the ‘hawkish’ voices dominant on the [ECB] Governing Council,” the analyst noted.

This article was AI-translated and verified by a human editor