German yields set for weekly rise despite oil price fall, Fed's Warsh in focus

German two-year bond yields DE2YT=RR rose one basis point to 2.86% and were on course for a 2-bp weekly rise.

Traders were pricing the European Central Bank's deposit rate at 2.80% by March next year, up from the current 2.25%. By late 2027, markets saw the deposit rate at 2.90%, not far from the levels seen early this week, implying roughly a 60% probability of an ECB hike to 3%.

Analysts highlighted that investors are increasingly watching the so-called crack spread, rather than oil prices alone, when assessing the outlook for policy rates.

The crack spread, a key gauge of refining margins that tracks the difference between crude oil and refined products such as diesel, has jumped as refineries came under attack in Russia and across the Middle East.

It was at around $86 late Thursday from $50 in mid-June and $35 before the conflict erupted.