ECB Rate Hikes on Horizon as Euro Zone Bond Yields Hit Multi-Year Highs

Investors are bracing for two interest rate hikes by the European Central Bank (ECB) before its meeting, according to market expectations. Euro zone government bond yields have been hovering near multi-year highs as traders price in these rate hikes and a deposit rate of 3% by late 2027.

The ECB is widely anticipated to tighten its monetary policy while reiterating its data-dependent stance amid the ongoing Iran war. Investors are closely monitoring Brent crude, which has rallied towards $100, natural gas prices, and the crack spread - the margin between refined products and crude oil.

Germany's 10-year bond yield rose by 2 basis points to 3.38% on Wednesday, reaching its highest level since April 2011 at 3.3982%. This increase in yields is largely driven by rising refinery costs, which have surged since late June, fueling inflation.