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ECB Policy · Geopolitics · German Bunds · Inflation
German 10-year Bund yields have climbed to 2.9%, reaching levels not seen since January 23, driven by escalating geopolitical tensions in the Middle East and renewed inflation concerns.
The Iran conflict has pushed energy prices higher, prompting money markets to significantly revise their expectations for European Central Bank (ECB) monetary policy. Initially, a rate cut was considered likely, but now investors are pricing in at least one, and potentially two, ECB interest rate hikes later this year.
This hawkish shift is reinforced by ECB President Christine Lagarde's recent statements, reaffirming the central bank's commitment to controlling inflation. The trend extends beyond Germany, with Italian 10-year BTP yields also rising to 3.8%, their highest since April 2025, reflecting broader eurozone inflation worries and expectations of tighter monetary policy.
The market's focus is now firmly on the ECB's upcoming policy meeting for further guidance on how it plans to mitigate inflationary pressures.
