Eurozone government bond yields were largely unchanged on Tuesday as investors assessed the impact of fresh U.S. sanctions on Iran and a modest pullback in oil prices, according to a report by Reuters.
Germany's 10-year government bond yield, the benchmark for the euro zone, was broadly flat at 3.242%, remaining close to the 15-year high of 3.275% reached last week. Bond yields move inversely to prices.
Longer-dated bond yields around the world climbed to their highest levels in a decade or more last week as investors weighed the inflationary risks from the U.S.-Israeli conflict with Iran, rising energy costs and elevated government spending. Germany's 30-year yield was also little changed at 3.745%, just below last week's 15-year high of 3.787%.
Oil prices edged lower as markets assessed the potential economic impact of the latest U.S. sanctions, which Washington said aimed to cut off a key source of Iran's revenue. Iran has vowed to retaliate and said it expects major trading partners to resist the U.S. pressure campaign.
According to Reuters, Brent crude fell around 1% to $91.40 a barrel on Tuesday, easing from Friday's one-month high of $94.80. The renewed rise in energy prices in recent weeks has prompted investors to increase expectations for further European Central Bank interest-rate hikes.
Money markets were pricing about 44 basis points of additional ECB tightening by the end of the year, slightly below Monday's level but above the 41 basis points priced in at the beginning of last week.
According to Reuters, stronger-than-expected economic growth has also contributed to higher bond yields and increased expectations for rate hikes. Data released on Tuesday showed that Germany's economy expanded 0.3% in the second quarter, exceeding the preliminary estimate of 0.2%.
French long-term borrowing costs remained elevated, with the 30-year government bond yield broadly unchanged at 4.894%. It stayed close to the 18-year high of 4.923% reached on Monday, highlighting continued pressure on euro zone sovereign debt markets.
