ECB Hikes Rates Amid Oil Price Pressures and US Inflation Data Looms

Nervous markets await US inflation data after the European Central Bank (ECB) raised interest rates for a second time this year. Brent crude prices remain above $100 a barrel, raising concerns about renewed inflation pressure.

The ECB's decision to raise its key interest rate to 2.50% was expected, but investors are now focused on ECB President Christine Lagarde's press conference response to questions about further hikes.

Columbia Threadneedle's Global Head of Absolute Return Fixed Income, Keith Patton, noted that the market is waiting for a dovish, data-dependent call from Lagarde. Traders currently price ECB rates rising to 2.74% by December and another hike by this time next year with roughly a 40% chance of an additional hike after that.

Governments are also buying back longer-dated bonds as the global selloff pushed 30-year yields to their highest level since 2007. The UK's 10-year and 20-year yields near respective post-2007 and 1998 highs, while benchmark 10-year U.S. Treasury yields nudged up to 4.85%.