Euro zone bond yields drop as oil edges down amid Hormuz doubts
TLT•Germany leads the move lower
Germany's 10-year bond yield DE10YT=RR was down 2 basis points to 3.15%, after climbing 5 bps on Monday on the back of rising oil prices. Yields rise as prices fall and vice versa.
Germany's 2-year bond yield DE2YT=RR, which is sensitive to European Central Bank rate expectations, fell 2 bps to 2.77% after rising 5 bps on Monday.
Italy's and France's 10-year bond yields IT10YT=RR, FR10YT=RR were both down 2 bps.
Markets await U.S. inflation data
Bond markets were also waiting for Wednesday's U.S. CPI inflation report, which will influence the Federal Reserve's rate decisions and have knock-on effects for bond markets around the world.
Euro zone yields fall as oil eases
Euro zone bond yields fell on Tuesday, reversing an earlier rise, as oil prices edged lower after Qatar's foreign ministry spokesperson said talks between Oman and Iran on the future of shipping in the Strait of Hormuz are in an advanced stage.
Meanwhile, disruption to Middle East energy flows continued, with three crew members killed in a suspected attack by Iran-backed Houthis on a small cargo vessel in the Bab el-Mandeb strait.
Oil, ECB expectations and long-dated yields
Oil prices fell on Tuesday, with Brent crude LCOc1 down 2% at $86.80 a barrel, after increasing 5% on Monday as the prospect of a near-term Hormuz deal ebbed.
"We are back to the situation where there is no war ongoing, but the Strait of Hormuz remains closed," Mohit Kumar, a senior European economist at Jefferies, said.
