Wall Street rises as materials and crypto stocks offset continued bond sell-off
Investing.com - Eurozone government bond yields traded in a narrow range on Tuesday, with benchmark borrowing costs stabilizing as fixed-income desks paused following a volatile end to July and prepared for incoming economic releases later in the week.
The benchmark German 10-year Bund yield was flat at 3.15%, holding near multi-week highs. Meanwhile, the rate-sensitive two-year German yield edged slightly higher to 2.77%, reflecting sustained caution among traders over near-term monetary policy expectations.
Bond markets entered August looking for direction after exiting July under significant pressure. Throughout July, European sovereign debt suffered its largest monthly sell-off since March, with 10-year German yields surging roughly 30 basis points to approach 15-year highs.
Fixed-income investors spent the final days of the month digesting a potent combination of geopolitical friction, volatile energy markets, and sticky inflation. Although Eurozone second-quarter GDP expanded by a surprisingly resilient 0.4%, preliminary July data showed Eurozone headline inflation ticking up to 2.9%, with core and services inflation remaining elevated.
The resilient growth and persistent price pressures sharply boosted market expectations for further European Central Bank (ECB) monetary tightening, with traders pricing in another 25-basis-point rate hike at the ECB’s Sept. 10 meeting and considering a second move by early 2027.
While a recent dip in crude oil prices - triggered by news of upcoming U.S.-Iran diplomatic talks - offered brief relief to bond holders on Monday, underlying yield floors have remained firm.
Trading desks are now looking ahead to a fresh batch of economic releases due later this week, including final Eurozone composite and services PMI figures on Wednesday, followed by Eurozone retail sales data on Thursday.
Bond traders will analyze these prints to assess whether consumer demand and business activity are softening enough to alter the ECB’s hawkish policy stance.
