Bund yields edge up after AfD win and ahead of ECB meeting

Traders were pricing the European Central Bank's deposit rate at 2.71% by December, implying more than an 80% probability of a second rate hike after the widely expected increase later this month, from the current 2.25%. They continued to build momentum towards a terminal 3%, with the policy rate last seen at 3.0% by September 2027.

"We do not see further hikes in 2026 but are watching renewed upside risks from gas and food which could make inflation more entrenched and start to feed second-round effects that are not yet visible," said Alessia Berardi, head of global macroeconomics at Amundi Investment Institute.

"At the same time, growth risks and pressure in sovereign yields could keep it from moving too aggressively,” she added.

The ECB will raise interest rates on September 10 for the second and final time in what would be its shortest hiking campaign in 15 years, according to a Reuters poll.