07.10.202608:52:51UTC+00German Bunds Outperform as Oil and Political Risks Rise

German Bund yields were broadly steady at 3.48%, while borrowing costs in more heavily indebted euro-area countries climbed as investors sought safe-haven assets amid a rebound in oil prices and lingering fiscal and political uncertainty across Europe. Brent crude rose back above $100 a barrel after Iran stepped up attacks on shipping in the Strait of Hormuz, bolstering expectations of further rate hikes by major central banks. Markets now anticipate two additional ECB rate increases by March 2027, with swaps pricing in roughly 75 basis points of tightening by the end of next year.

French government bonds remain under pressure as political uncertainty ahead of the 2027 presidential election fuels concerns over the country’s public finances. The minority government has presented a deficit-reduction program, but the fiscal watchdog has cautioned that its economic projections are “optimistic.” Political risk is also intensifying elsewhere in the region, with Spain calling a snap election for November 29 and Italy scheduled to hold national elections next year.