Germany’s 10-year Bund yield eased to 3%, falling back from multi-year highs, as investors reassessed economic growth risks linked to the energy shock from the Middle East conflict. However, yields remained on track to end March up 37 basis points, the largest monthly increase since late 2022, amid a broad inflation spike. Soaring energy costs pushed the Eurozone’s inflation rate to 2.5% and Germany’s EU-harmonized rate to 2.8%, both exceeding the ECB’s 2% target and marking the highest readings in over a year. The data prompted markets to ditch rate cut expectations, now anticipating at least two ECB hikes by 2026. While ECB’s François Villeroy de Galhau underscored the bank’s determination to curb inflation, he stressed that timing discussions for rate moves were still premature.
