Euro zone bond yields nudge higher as oil rises, inflation data in focus
TLT•Euro zone bond yields edged higher as oil prices climbed, with Germany’s 10-year yield at 3.6303%, near its highest since June 2009. Euro area inflation is expected to accelerate to 3.6% in September from 3.2% in August.
1. Yields extend gains
Euro zone bond yields nudged higher Monday as oil prices climbed and investors looked ahead to a week of data releases. Germany’s 10-year government bond yield was at 3.6303%, around its highest since June 2009; it rose for a seventh straight week last week and was on track for a monthly increase of more than 30 basis points.
2. Oil and rate outlook
Brent crude was around 2% higher at $106.46 a barrel after U.S. President Donald Trump rejected an Iranian peace deal to reopen the Strait of Hormuz and end fighting. Elevated energy prices and hawkish central banks have lifted expectations for higher interest rates. The European Central Bank has raised rates twice this year, and money markets were pricing in at least one more increase.
3. Inflation data ahead
Euro area inflation is expected to have accelerated to 3.6% in September from 3.2% in August, driven again by energy prices. Investors and policymakers will also watch services and food inflation for signs of possible second-round effects. Germany’s two-year yield rose 2.7 basis points to 3.3134% and was headed for a monthly jump of more than 39 basis points, its biggest since March.
