German bond yields climbed toward multi-year highs on Tuesday as crude oil closed in on $100 a barrel, hardening bets that the European Central Bank will raise rates at Thursday's meeting. August Eurozone inflation accelerated to 3.3% on an energy-driven jump, and traders are now also watching Friday's U.S. inflation print for the next move in global yields.
Euro zone government bond yields pushed higher on Tuesday, with Germany's benchmark borrowing costs near their highest levels in years as oil's advance toward the $100 mark reinforced expectations of an imminent ECB rate move.
Yields sit at multi-year highs
Germany's policy-sensitive two-year Schatz yield inched up to 2.984%, trading near its highest level since 2024. Further out the curve, the benchmark 10-year Bund yield held firm at 3.382%, remaining near its highest level in 15 years.
Fixed-income desks are bracing for tighter monetary policy across the bloc as bond markets digest an energy shock alongside persistent central bank hawkishness ahead of Thursday's ECB Governing Council meeting.
Oil near $100 pushes the ECB toward a hike
Brent crude surged toward $98 a barrel, rapidly closing in on the $100 psychological milestone after threats from Tehran to target Persian Gulf energy infrastructure. Crossing triple digits would mark a critical threshold, since it threatens to trigger severe cost-push stagflation that forces central banks to keep rates restrictive even as growth slows.
Preliminary August data showed Eurozone headline inflation accelerating to 3.3% year-on-year. The rise was driven chiefly by a 14.3% surge in energy components. High short-end yields reflect growing bets that, with crude near $100, the ECB will be forced to maintain a restrictive policy stance well into late autumn.
A U.S. inflation test looms next
Beyond Thursday's ECB decision, European fixed-income desks are also watching Friday's U.S. Consumer Price Index for broader direction. Following last week's nonfarm payrolls report showing employment expand by 162,000, a hot U.S. inflation print would firm up expectations for a Federal Reserve interest rate hike at its September 15-16 meeting, potentially pushing global sovereign yields even higher.
Source: Investing.com
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