German yields edge up to fresh multi-year highs after Warsh speech
TLT•German bond yields hit fresh multi-year highs
Germany's policy-sensitive two-year government bond yield hit its highest level since July 2024 on Monday, taking cues from U.S. Treasuries after Federal Reserve Chair Kevin Warsh signalled rates may need to rise and oil prices rose.
German two-year bond yields DE2YT=RR were up 1.5 basis points to around 2.90%.
Market pricing also suggested traders were positioning for rates to rise towards 3% by late 2027.
Germany's 10-year bond yield DE10YT=RR was up 1 basis point to 3.2903%, its highest level since 2011.
Fed comments and oil prices lift rate expectations
Traders now price a rise in the European Central Bank's deposit rate to 2.70% by December EURESTECBM3X4=ICAP, implying an 80% chance of a second hike after one anticipated in September, from the current 2.25%.
U.S. two-year Treasury yields jumped and the yield curve flattened on Friday after Warsh signalled the Fed may need to hold rates if above-target inflation persists.
They were last down 2.5 bps in early London trade after rising 12 bps on Friday US2YT=RR. Benchmark U.S. 10-year Treasury yields US10YT=RR fell 1 bp after rising 5 bps on Friday.
Rising oil prices also added to upward pressure on euro zone bond yields. They rose after reports the U.S. attacked an Iranian island in the Strait of Hormuz.
