Eurozone Yields Near 15-Year Highs Amid ECB Rate Hike Expectations

European Central Bank (ECB) rate hikes are back in focus as Eurozone bond yields near 15-year highs. Traders expect the ECB to raise interest rates again in September, driven by concerns over inflation and its impact from the Middle East war.

The 10-year Bund yield held around 3.20%, close to its late-July high, while the two-year yield sat near 2.79%. Derivatives tied to ECB policy rates show markets pricing the deposit rate at about 2.76% by March 2027, implying a better than 90% chance of a September hike.

Jefferies noted that the ECB may be limited to 'maximum one hike', arguing oil prices remain below the central bank's adverse scenarios outlined in June. Investors are watching spreads, the yield gap between riskier countries' bonds and Germany's, for signs that tighter policy is stressing highly indebted governments.