Eurozone Bond Yields Soar as Energy Prices Spike Ahead of ECB Rate Decision
The Eurozone's sovereign bond yields are hovering near multi-year highs as energy prices surge ahead of the European Central Bank's (ECB) rate decision on Thursday. The benchmark 10-year German bund yield is trading firmly near 3.382%, its highest level since August 2011. Money markets have almost fully priced in a 25-basis-point interest rate increase from ECB President Christine Lagarde and the Governing Council.
The relentless upward momentum in European yields is driven by acute inflation fears stemming from major energy benchmarks, which threaten heavily import-dependent European economies. The surge in energy prices has pushed Brent crude to just cents away from the $100-a-barrel psychological threshold. This follows an escalation in Middle East military friction and threats to Persian Gulf shipping lanes.
The attack on Saudi Arabian cities by Iranian-backed Houthis in Yemen has drawn a key U.S. regional ally deeper into the kinetic theater, while direct U.S. strikes against multiple Iranian oil tankers were met with an Iranian missile strike on a U.S. military base in Jordan.