German bond yields hold steady near multi-year highs as the market braces for persistently high energy prices

⑴ The yield on Germany's 10-year government bonds remained steady at 3.15%, slightly below Monday's 15-year high of 3.19%. Investors are preparing for persistently elevated energy prices, which could drive overall inflation higher and prompt further rate hikes by the central bank. Brent crude oil held near its four-year high after the U.S. President delayed additional strikes on Iran but instructed the military to be ready for "comprehensive, large-scale attacks" if negotiations break down.⑵ Expectations for tightening by the European Central Bank have cooled slightly, but the market still sees an 80% chance of a 25 basis point rate hike next month and possibly two more increases before the end of the year. Recent data underscore mounting economic pressures: Due to Middle Eastern energy supply restrictions, eurozone growth slowed to 0.1% in Q1 2026, its weakest since Q2 2025. Meanwhile, April's inflation rate rose to 3%, the highest since September 2023 and well above the ECB's 2% target.⑶ Investors are currently focused on Thursday's release of the S&P Global Purchasing Managers’ Index preliminary figures for further policy signals.