German Yields Rise Amid Euro Zone Supply Fears

Germany's government bond yields are set for their fourth straight weekly rise, the biggest since mid-July. Investors expect central banks to keep policy restrictive due to persistent inflation pressures in a resilient economy.

Natural gas and oil prices have headed for a weekly gain as renewed U.S.-Iran hostilities heighten concerns over Middle East supply risks. Analysts note that markets are becoming more sensitive to European gas than crude alone, as the euro zone has shifted away from Russia-Ukraine and Middle East supply in favor of Norway and U.S. alternatives.

Germany's 10-year bond yield is flat at 3.35%, set for a weekly rise of 7.5 bps. The two-year bond yields rose 0.5 bps to 2.96% as traders price the European Central Bank's deposit rate at 2.73% by December, implying a roughly 90% probability of a second rate hike after the widely expected increase later this month.