08.06.202608:08:48UTC+00Bund Yields at Over Two-Week High on Inflation Fears

German 10-year Bund yields rose above 3.05%, their highest level since May 21, as traders nearly fully priced in three European Central Bank rate increases for this year. The move was driven by fading expectations of a rapid reopening of the Strait of Hormuz and a more than 4% jump in Brent crude prices after Iran and Israel exchanged missile strikes, despite President Trump’s calls for de-escalation.

Ahead of the upcoming ECB policy meeting, a 25-basis-point hike is widely anticipated. This follows a rise in euro area inflation to 3.2% in May, the highest reading in more than two and a half years. However, the outlook remains uncertain after Eurozone GDP was revised to show a contraction in Q1 2026, the first since late 2022 and the sharpest downturn since mid-2020.

Money markets now imply that the ECB deposit rate will reach around 2.7% by December, up from the current 2%. Pricing suggests a near-certain first rate increase this month, with a second move expected in September.