LONDON, July 24 (Reuters) - Euro zone bond yields nudged
lower on Friday, having hit multi-year highs a day earlier, as
market participants took a breather and weighed the outlook for
interest rates and inflation as oil prices eased back below the
$100 mark.
The yield on Germany's 10-year bond, the benchmark for the
euro zone, was last down 1.5 basis points (bps) to 3.1965%. It
hit a 15-year high in the previous session, rising as high as
3.2118%.
Euro zone bonds have been under pressure - especially given
the European economy's vulnerability to imported energy -
throughout the week with oil prices rising above $100 per barrel
for the first time since May. On Friday, Brent crude futures
were last 2.1% lower at $98.59 per barrel, though they were
still set for a 12% weekly rise.
Energy prices have been pushed higher by fresh hostilities
in the Middle East, as well as concerns about a second shipping
chokepoint emerging, disrupting global energy flows further. The
spike in energy costs prompted fresh inflation worries and led
traders to bet on additional policy tightening from the world's
central banks.
The European Central Bank left interest rates unchanged on
Thursday, as expected, but kept the option for a September
increase on the table. Several ECB policymakers on Friday also
noted that inflation risks are high and that the central bank
may need to raise rates once more, but they all stopped short of
calling for an outright hike at the bank's next meeting in
September.
Markets were last pricing in a strong chance of a September
rate hike from the ECB, with the possibility of another increase
later in the year.
The yield on Germany's two-year bond, which is more
sensitive to interest rate expectations, was last around 3 bps
lower at 2.8593%, having touched its highest point since July
2024 in the previous session.
Elsewhere, news of fresh U.S. tariffs also contributed to
inflation worries. The Trump administration on Friday imposed
new tariffs of 10% and 12.5% on goods from 60 trading partners,
including the European Union, based on allegations of lax
enforcement of forced labor bans, just as a temporary 10% global
tariff expired.