German Bond Yields Rise as Investors Weigh Inflation Risks

German bond yields rose on Friday as investors weighed persistent inflation risks and expectations for the European Central Bank's interest-rate path.

The two-year government bond yield increased by 2 basis points to 2.86%, putting it on track for a weekly gain of about 4 basis points, despite oil prices falling on Friday.

Despite the decline in oil prices, bond investors continued to price a relatively firm interest-rate outlook for the ECB, reflecting concerns that inflation could remain persistent.

The market was pricing the ECB deposit rate at around 2.80% by March next year and 2.90% by late 2027, with a roughly 60% probability that the ECB could eventually raise rates to 3%.