Euro zone bond yields rise as oil climbs on Iran ceasefire doubts

Money markets also moved to price in more monetary tightening from the European Central Bank after German Bundesbank ‌chief Joachim Nagel told Reuters that raising interest rates in April is "an option". Germany's two-year bond yield, which is sensitive to ECB rate expectations, rose 6 basis points (bps) in early trading to 2.659%, after falling 4 bps on Wednesday.

Euro zone bond yields rose on Thursday as energy ​prices climbed again, with traders casting a sceptical ​eye on conflicting claims about the ‌status ​of ceasefire talks over the U.S.-Israeli war on Iran. Money markets also moved to price in more monetary tightening from the European Central Bank after German Bundesbank ‌chief Joachim Nagel told Reuters that raising interest rates in April is "an option".

Germany's two-year bond yield, which is sensitive to ECB rate expectations, rose 6 basis points (bps) in early trading to 2.659%, after falling 4 bps on Wednesday. ‌Yields rise as prices fall and vice versa. Iran's foreign minister said his country was reviewing a U.S. peace ‌plan but had no intention of holding talks on ending the conflict, contradicting President Donald Trump's claims that Iran was desperate to make a deal.

Oil prices rose as the two sides struggled or refused to find a way forward, with international benchmark Brent ⁠crude up around ​3% to $105 a barrel. Bond ⁠yields have largely moved in tandem with energy prices, which could drive an inflationary shock that may force the ECB to hike ⁠interest rates.

Money markets on Thursday were pricing in more than 75 basis points of ECB hikes by the end of ​the year, up from around 71 priced in late on Wednesday. ECB policymaker Nagel told Reuters that ⁠he and colleagues will have enough information about the war's economic impact to decide on a potential rate hike at their April 29-30 ⁠gathering.

"It ​is certainly an option, but just one option," he said of an April rate increase. Traders last saw around a 70% chance of a rate increase by April, up from around 65% late on ⁠Wednesday.

Germany's 10-year bond yield, the benchmark for the euro zone, rose 4 bps to 2.997% on Thursday, after ⁠falling 6 bps on Wednesday ⁠on reports of ceasefire talks. Italian yields rose more than most of their peers, with the 10-year up 8 bps at 3.919%. That pushed the spread between Italian ‌and German 10-year ‌yields up 4 bps to 90 bps.

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