Germany's 10-year bond yield touches three-week low on Hormuz deal optimism

Germany's 10-year government bond yield fell for a third consecutive day on Wednesday, driven by optimism over a potential U.S.-Iran deal to reopen the Strait of Hormuz.

U.S. President Donald Trump said that the U.S. and Iran were having "very good discussions", fuelling expectations of an end to the five-month conflict that has severely disrupted energy supplies from the Middle East.

Growing confidence that a deal can be reached pushed Brent futures LCOc1 to almost $78 per barrel early on Wednesday, their lowest in more than three weeks, although they have since ticked higher after Yemen's Iran-aligned Houthi rebels said they attacked a Saudi oil tanker in the Red Sea.

"Yields are just following what's happening with the oil market," said Mohit Kumar, chief economist Europe at Jefferies.

"In July you had a massive rally in oil and yields rose. Now oil is coming off, so yields are coming off as well."

Germany's 10-year yield DE10YT=RR, the euro zone benchmark, was last down 1.5 basis points at 3.104%, after earlier hitting its lowest since July 15 at 3.089%. Bond yields move inversely with prices.