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2026-07-13 19:20:10
[Middle East Conflict Pushes Up Eurozone Bond Yields, German Bonds Post Biggest Weekly Gain Since June, Interest Rate Hike Expectations Rise Slightly] ⑴ Eurozone bond yields rose across the board on Monday as the US and Iran launched mutual missile and drone attacks, and Iran announced the re-closure of the Strait of Hormuz. Rising oil prices and renewed global inflation concerns fueled the rise in the yield on Germany's benchmark 10-year government bond, which climbed 2.4 basis points to 3.0585%. The yield rose by approximately 10 basis points last week, marking its biggest weekly gain since early June. ⑵ The military conflict has reignited market concerns about the prospects for peace in the Middle East and the direction of inflation and interest rates. Previously, macroeconomic concerns had eased somewhat due to expectations of a peaceful resolution and falling energy costs. Brent crude oil rose 3.3% to $78.52 on Monday, higher than pre-war levels but still well below April's highs. (3) The yield on German 2-year government bonds, which is more sensitive to interest rate expectations, rose 4.3 basis points to 2.6921%, also recording its largest weekly gain since early June last week. Money market pricing indicates that the market expects the ECB to have about 37 basis points of tightening room this year, implying one rate hike and a nearly 50% probability of a second rate hike, a slight increase from last Friday. (4) The Chief Investment Officer of UBS Global Wealth Management pointed out that ECB officials recently hinted that inflationary pressures remain after the decline in energy prices, providing support for tightening expectations. However, he expects only one rate hike rather than a continuous rate hike cycle, as overall inflation data is positive and economic growth still faces headwinds. (5) Strategists at Commerzbank stated that in addition to the situation in the Middle East, factors such as domestic bond supply and large capital inflows in the coming days will exacerbate market volatility. They will pay close attention to the further guidance from the US June inflation data on the path of global interest rate expectations.
