Euro zone bond yields inch lower, Strait of Hormuz in focus

Euro zone government bond yields were a touch lower on Tuesday, in line with softer oil prices following a sharp selloff the previous day, with investors focused on developments in ‌the Strait ⁠of ⁠Hormuz.

Germany's 10-year bond yield, the benchmark for the euro zone was down 1 basis point at 3.07% after a 5 bp jump the previous session.

Government bond market traders are closely tracking the situation in the ⁠Gulf as ‌they assess when central banks will be forced to raise interest ⁠rates to prevent sky-high energy prices spilling over into broader inflation.


The European Central Bank kept rates unchanged last week, but it debated a rate hike and signalled that policy tightening might be necessary in June.

Bond yields rose sharply ‌on Monday driven by a jump in oil prices after the U.S. and Iran launched new ⁠attacks as they wrestled for control of the Strait of Hormuz.

Brent crude futures retreated on Tuesday but held near $114 a barrel.

Germany's rate-sensitive two-year yield was down 2 basis points at 2.69%, just off last week's one-month high of 2.76%.