28.08.202608:05:26UTC+00German Bund Yields Hit 2011 High

German 10-year Bund yields rose above 3.25%, reaching their highest level since March 2011, as investors stayed wary of stubborn inflation pressures despite the recent drop in oil prices. At the same time, markets were waiting for Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole for fresh guidance on the US interest rate outlook.

New inflation figures from France and Spain pointed to renewed price pressures in August, bolstering expectations that the ECB could resume rate hikes at its September meeting. Money markets now imply an ECB deposit rate of 2.80% by March next year, up from 2.25% currently, and around 2.90% by late 2027, suggesting roughly a 60% probability of an increase to 3%.

Recent ECB minutes indicated that officials view an additional rate rise as likely necessary. Meanwhile, Reuters reported that policymakers are ready to raise rates in September to contain the economic fallout from the Iran war, though they remain hesitant to signal any further tightening beyond that point.