The yield on Germany's 10-year government bonds remains steady around 3.20%, close to a more than 15-year high.

(1) The yield on Germany's 10-year government bonds remains steady near 3.20%, close to its highest level in over 15 years, as investors assess the risk that ongoing conflict in the Middle East may keep inflationary pressures elevated. Although Brent crude oil has retreated from its July highs of nearly $100 per barrel, it has still risen by about 45% since the start of the year, intensifying concerns about inflation driven by energy prices. (2) Iran has called on the United States to accept defeat, while US authorities warn that fuel prices will remain high due to ongoing conflict. The market is increasingly pricing in a tighter path from the European Central Bank, with deposit rates expected to rise from the current 2.25% to 2.76% by March 2027, and the probability of a rate hike in September exceeding 90%. In the US, weaker economic indicators have reduced expectations for imminent interest rate increases by the Federal Reserve.