ECB Hike Looms as Euro Yields Rise on Energy Shock

European sovereign bond yields rose on Tuesday as investors anticipated an imminent interest rate hike from the European Central Bank (ECB).

The two-year German Schatz yield climbed to 2.984%, nearing its highest level since 2024, while the 10-year Bund yield held firm at 3.382%, near a 15-year high.

The upward pressure on yields comes as bond markets digest the effects of a severe energy shock and ongoing central bank hawkishness ahead of Thursday's ECB Governing Council meeting.

Oil prices surged towards $98 per barrel, threatening to cross the psychological barrier at $100. If reached, this could trigger stagflationary pressures, forcing the ECB to maintain restrictive policy well into late autumn.