Eurozone government bond and U.S. Treasury yields rose in early European trade as oil prices increased and investors looked ahead to the European Central Bank's interest-rate decision on Thursday and U.S. consumer-price inflation data on Friday.
The 10-year U.S. Treasury yield increased 2.4 basis points to 4.808%, while the 10-year German Bund yield was up 1.2 basis points to 3.393%, according to Tradeweb, both remaining close to recent multiyear highs.
Brent oil rose 2.2% to $99.10 per barrel.
"With oil approaching $100 again, euro rates are following higher," Benjamin Schroeder and Michiel Tukker, senior rates strategists at ING said in a note.
The ECB is widely expected to raise interest rates by 25 basis points this week, bringing the deposit rate to 2.50%. It will also release new staff forecasts on growth and inflation.
After that, the U.S. inflation data will be a key input for both policymakers and investors ahead of the Federal Reserve's rate decision on Sept. 16. There, the outcome of the rate decision is less clear-cut, with markets pricing a 59% probability of a rate hike, according to LSEG.
A second ECB rate hike following on from an increase in June would reinforce the ECB's "cautious, data-dependent stance," Francois Rimeu, senior strategist at Credit Mutuel Asset Management said in a note.
Further rate hikes that would take the deposit rate beyond 2.50% could prove necessary, however, if inflation risks intensify, "all the more so given that growth continues to surprise on the upside," he said.
Given the economic resistance seen so far in the eurozone, apoBank anticipates slight upward revisions to the ECB's growth forecasts for both 2026 and 2027, said economist Bjoern Ohl in a note.
"A key question for investors will be whether and how [ECB President Christine] Lagarde addresses the recent surge in energy prices and the further interest rate hikes currently priced in the market," he said.
Markets currently price the peak of the ECB's deposit rate just below 3% around mid-year 2027.
"Our baseline scenario remains that the ECB will not raise its key interest rate further following the September meeting," Ohl said.
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