Germany’s 10-year government bond yield rises to 3.12% as oil price rebound reignites inflation concerns

⑴ The yield on Germany's 10-year government bonds has risen to 3.12%, rebounding from a two-week low. A new round of military clashes between the US and Iran has pushed up oil prices and reignited inflation concerns. Investors are maintaining caution ahead of the Federal Reserve's policy decision, with the market generally expecting rates to remain unchanged, though pricing in roughly a one-third chance of a 25 basis point hike.⑵ Pricing in eurozone money markets shows that the market expects the European Central Bank to conduct nearly two rate hikes by March 2027. ECB Governing Council member Kazimir stated that at least one more rate hike may be needed to control inflation, adding that the weakening economic outlook could even make more tightening than currently expected reasonable. Chief Economist Lane indicated that the current inflation shock remains moderate, supporting further tightening of policy. Investors are watching eurozone inflation data later this week for new signals on ECB policy prospects.