Eurozone bond yields climb up as market eyes inflation and ECB rate hike

On Tuesday, Euro zone bond yields have risen as investors focus on inflation and possible rate hikes by the European Central Bank (ECB). Investors are examining the effects of the OPEC+ consortium’s announcement of  further reductions in oil production, which caused an increase in oil prices on Monday. 

The yield for Germany’s two-year bond, which is highly sensitive to rate expectations rose by 3 basis points to 2.687%. Data released on Tuesday shows that German exports grew by 4% in February. Eurozone consumer expectations survey data is expected to be released soon and its inflation data could impact the bond markets. 

The yields of higher-risk countries, such as Italy also rose slightly. Economists believe that this rise is due to reduced confidence in Eurozone’s more heavily indebted economies. 

Traders predict that the ECB’s main interest rate will peak at 3.6% in September based on current market prices for derivatives. Nonetheless, before the banking crisis, investors had predicted a high of more than 4% implying lower inflation expectations among investors.