European bond yields rise across the board, Brent returns above $90 intensifying inflation concerns, European Central Bank rate hike expectations for September grow stronger

智通财经2026/07/21 15:11

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Eurozone government bond yields generally rose on Tuesday, with the German 10-year government bond yield increasing by more than 2 basis points to 3.175%, reaching the highest level in over eight weeks. The rebound of Brent crude oil above $90 per barrel was the main catalyst, while ongoing geopolitical conflicts continued to threaten the inflation outlook and reinforced the logic for the European Central Bank to maintain a tightening stance.
Energy prices have recently dominated bond market movements. Mutual military strikes between the US and Iran have nearly disrupted shipping in the Strait of Hormuz. On the day, Brent futures rose by more than 2%, approaching the five-week high of $91.42 hit on Monday. Meanwhile, the Netherlands' benchmark wholesale natural gas price hit a four-month intraday high, further increasing inflation concerns.
The market expects the European Central Bank to keep its deposit rate unchanged at 2.25% this week, but around 45 basis points of tightening has already been priced in for this year. This corresponds to a 25 basis point rate hike plus an 80% probability of a second move. Institutions believe a rate hike in September is supported by inflation data, but further subsequent hikes will face constraints from economic growth.
The German 2-year government bond yield rose by about 1.5 basis points to 2.793%, after hitting a two-year high of 2.8174% on Monday, reflecting the continued increase in market sensitivity to policy expectations. UK bonds performed relatively steadily, with the 10-year yield unchanged at 5.034%. The new Chancellor of the Exchequer is considered more market-friendly compared to other potential candidates, which has to some extent soothed investor sentiment.

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European bond yields rise across the board, Brent returns above $90 intensifying inflation concerns, European Central Bank rate hike expectations for September grow stronger

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