Euro zone bond yields rise as oil climbs, inflation data in focus
TLT•Euro zone bond yields rose as oil prices climbed, with Germany’s 10-year yield at 3.64%, near its highest level since June 2009. September euro zone inflation is expected to reach 3.6%, up from 3.2% in August.
1. Yields climb
Euro zone government bond yields rose at the start of a week of key economic data as oil prices increased on doubts that the US-Iran conflict would be resolved soon. Germany’s 10-year yield was up 2 basis points at 3.64%, around its highest level since June 2009, and was on track for a monthly rise of more than 31 basis points.
2. Inflation in focus
Brent crude rose about 4% to $108.50 a barrel after Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end hostilities. Markets were pricing in at least one further European Central Bank rate hike by year-end and roughly 100 basis points of further tightening through October 2027. Flash inflation data due later in the week are expected to show euro zone inflation accelerating to 3.6% in September from 3.2% in August.
3. Other bond yields
Germany’s two-year yield rose 1.5 basis points to 3.30% and was on course for a monthly increase of about 40 basis points, its biggest rise since March. Italy’s two-year yield was about 6 basis points higher at 3.58%. Nomura economist Andrzej Szczepaniak said he would be “very unsurprised to see a jump in headline inflation,” citing higher vehicle fuel prices.
