Euro zone bond yields rise as Strait of Hormuz impasse continues
TLT•Oil and rate expectations keep markets contained
Despite the lack of progress on talks to resolve the stand-off, oil prices have risen relatively modestly and are up 5% for the week after falling the previous two weeks, limiting inflationary pressures.
Oil fell 2% on Thursday after U.S. oil inventories rose and two major energy organisations lowered their demand forecasts. Brent crude rose 1% on Friday to $88.20 a barrel LCOc1.
U.S. Treasury yields edged higher after U.S. data, with the 10-year US10YT=RR up 3 bps at 4.67%.
Germany's 2-year bond yield DE2YT=RR, which is sensitive to European Central Bank rate expectations, rose 2.5 bps to 2.79% and was set to end the week 5 bps higher.
Traders in money markets were last pricing in around 40 bps of further European Central Bank monetary tightening this year, up about 2 bps from the start of the week.
"We see more chances for rate hikes to be priced out and Bund yields to test the lower bound of their range," said Christoph Rieger, head of rates at Commerzbank.
He pointed to subdued U.S. inflation data, which has an impact on expectations for the euro zone economy, and said Friday's U.S. retail sales figures could help cool bond markets if they come in below expectations.
Euro zone yields rise as impasse over Strait of Hormuz continues
LONDON, Aug. 14 (Reuters) - Euro zone bond yields rose on Friday as the impasse between the U.S. and Iran over the Strait of Hormuz continued, while oil prices remained subdued as investors focused on signs of weaker demand.
Germany's 10-year bond yield rose 5 basis points to 3.19% and was up 6 bps across the week.
