2026.03.3009:23:24UTC+00Bund Yield Remains High as Middle East Tensions Fuel Rate Hike Bets

Germany’s 10-year Bund yield was unchanged at 3.1%, hovering near its highest level since May 2011, and was on track to end March more than 40 basis points higher. Investors remained nervous about the economic fallout from the prolonged conflict in the Middle East, as reports of US preparations for a potential ground operation overshadowed Washington’s claims of progress in talks with Iran.

Recent data further reinforced the hawkish narrative: regional German CPI figures pointed to quickening inflation, while a Eurozone business survey showed a sharp deterioration in sentiment alongside a jump in inflation expectations. In response, markets have significantly repriced the outlook for ECB policy, now discounting at least two rate hikes in 2026—and potentially a third—scrapping earlier bets that had assigned a roughly 40% probability to a rate cut.

On Monday, French central bank governor François Villeroy de Galhau reiterated the ECB’s determination to prevent energy-driven price pressures from spreading more broadly, while emphasizing that it was still “premature” to give specific guidance on the timing of future rate moves.