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ECB Rebuffs Market Hikes as Bunds Hit 3.57%

By Markets Desk · 2026-09-20 · 2 min read
A classical bank facade with columns and a dome
Illustration: Tradingbird

German 10-year yields hit 3.5723% as the ECB rejects a mechanical link between energy prices and rate hikes.

German 10-year Bund yields rose to 3.5723% this week. This is the highest level since June 2009. The move reflects aggressive market bets on further rate hikes. European Central Bank President Christine Lagarde rejected this path on Friday. She stated that interest rates will not move in tandem with oil and gas prices. The ECB will not let energy shocks dictate monetary policy.

Traders currently price in three to four additional hikes over the next year. This exceeds most economic forecasts. The ECB raised rates by 25 basis points in June and September. The deposit facility rate now stands at 2.5%. Lagarde described the required policy response as measured. She emphasized that the central bank needs more data before acting.

Energy Shocks Distort Inflation Path

Eurozone inflation reached 3.3% in August. This is up from 2.9% in July. Energy costs are the primary driver. Natural gas prices are at their highest since 2022. The ECB projects average inflation of 2.5% next year. Underlying inflation is expected to hit 2.6% in 2027. Deputy Governor Boris Vujcic noted that high energy prices squeeze household incomes. This creates a drag on consumption and GDP.

Raising rates does not increase energy supply. Aggressive tightening could suppress business investment. This creates a double tightening effect. The ECB must balance inflation risks against economic slowdown. Vujcic stated that the current market path is driven by energy. The bank considers a broader set of indicators.

Bond Markets Signal Global Stress

German two-year yields touched 3.3123%. This is the highest since September 2023. Markets had priced in a deposit rate of 3.25% to 3.5%. Lagarde said there are no signs of disorderly market moves. She attributed the yield rise to global factors. These include inflation, monetary policy, and government financing needs.

The rise in long-end yields is a global phenomenon. Vujcic stated that this does not yet threaten financial stability. The ECB remains focused on core inflation dynamics. The central bank will reassess its stance as new data arrives. The policy path remains data-dependent.

GN Auto Markets Data Context

GN auto markets/forex: eurozone inflation data shows the impact of supply disruptions. The Middle East conflict continues to affect oil supplies. International oil prices have risen sharply. These factors contribute to the adverse scenario in ECB analysis. If prices remain elevated, inflation could approach 4% by year-end. The central bank maintains a cautious approach.

Based on reporting by biggo.com, compiled by the Tradingbird desk.

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