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Germany’s 10-year Bund yield fell to 3.14%, pulling back from last week’s 15‑year high above 3.2%, as weaker oil prices eased near-term inflation concerns. Brent crude retreated sharply from recent two‑month highs after the United States and Iran paused hostilities, raising hopes for a diplomatic solution that could normalize shipping through the Strait of Hormuz.
Money markets trimmed expectations for additional European Central Bank tightening, though they still price in nearly two 25 bp rate hikes by February 2027. ECB Chief Economist Philip Lane noted that the current inflation shock remains moderate, warranting some further policy tightening but not an aggressive response, and reiterated that inflation is expected to return to the 2% target over the coming year.
At its meeting last week, the ECB left interest rates unchanged, after raising them in June, while signaling that another increase in September remains on the table. Investors now look ahead to a new set of inflation data due later this week for further guidance on the policy outlook.
