Eurozone yields near decade highs amid Brent crude surge and ECB-Fed watch

U.S. Treasury yields remained steady at multi-year highs, with the benchmark 10-year rate at 4.978% and the 30-year yield at 5.353%, just below the 5% threshold. Meanwhile, Brent crude futures surged by approximately 3%, reaching around $112 per barrel, as geopolitical tensions in the Red Sea and Gulf region intensified. These developments precede key central bank meetings: the Federal Reserve’s policy decision on September 15–16 and the European Central Bank’s rate hike on Thursday, with the Bank of England also set to announce its decision that day. German 10-year Bund yields held steady at 3.511%, while policy-sensitive 2-year Schatz yields remained flat at 3.197%. Italian 10-year bond yields hovered near 4.38%, and French 10-year OAT yields were around 4.45%, reflecting elevated borrowing costs across the Eurozone. U.S. inflation data, including a headline CPI of 3.4% and a core month-on-month increase to 0.3%, reinforced expectations of persistent price pressures, though market expectations for further tightening remain limited, with an 86% probability of a 25-basis-point rate hike at the Fed’s meeting. UBS strategists noted that markets anticipate only a few additional adjustments rather than a broader tightening cycle, citing concerns over energy shocks and inflation risks. ECB policymaker Peter Kazimir warned that Eurozone inflation risks could exceed forecasts as natural gas and power prices rise, though he emphasized that the bank remains open to action if data supports it, avoiding a premature signal of hesitation. The Bank of Japan is also expected to raise rates by 25 basis points to 1.25% on Friday, adding to the broader market focus on central bank responses to inflation and economic stability amid rising energy prices and geopolitical tensions.