Germany’s 10-year government bond yield rises to a two-week high

German 10-year government bond yields are rising toward 3.4%, reaching the highest level since the end of October. This is due to investors increasing their bets on further interest rate hikes by the European Central Bank, while this week's stock market rebound has weakened demand for safe-haven assets. The European Central Bank's euro short-term rate (€STR) forward contracts currently show that the market expects the deposit rate to rise from the current 2.5% to 3.25% by the end of 2027, higher than last week's pricing of 3%. Forward contracts also indicate that by December 2026, the rate will reach 2.74%. Meanwhile, US inflation data released on Tuesday was stronger than expected, pushing up US Treasury yields and strengthening expectations of further tightening by the Federal Reserve. The market has now fully priced in a rate hike in December and is also considering the possibility of a 50 basis point increase. Additionally, US President Trump stated on Thursday that Washington does not need to reach an agreement with Iran, causing oil prices to rebound from a more than two-month low and further fueling inflation concerns.