German 2-year bond yields nudge higher as Middle East conflict sparks inflation concerns
LONDON, March 2 (Reuters) - Short-dated euro zone government bond yields nudged above multi-month lows on Monday, as concern mounted over the impact of prolonged conflict in the Middle East on global growth and inflation.
The yield on the German two-year bond
The yield on the benchmark German 10-year bond DE10YT=RR started the day lower as risk-off sentiment dominated markets, before edging into positive territory. It was last steady at 2.6511%, trading around levels last seen in mid-November.
Bund yields ended February with their steepest monthly drop since last April after declining for three consecutive weeks.
It appeared increasingly likely that the Middle East conflict could become drawn out as military strikes by the United States and Israel on Iran showed no sign of easing up, and Iran has responded with missile barrages across the region.
U.S. President Donald Trump suggested in an interview with the Daily Mail the conflict could last for four weeks, while posting that attacks would continue until U.S. objectives were met.
While crises and conflict often prompt investors to pour into safe-haven assets, such as government bonds, concerns also grew about inflation being pushed higher by elevated energy prices.
Oil prices surged on supply disruption concerns, with Brent crude LCOc1 last up around 9.5% to $79.78 a barrel.
Inflation reigniting could eventually put pressure on the European Central Bank to adapt its interest rate policy. Money markets were last pricing in around a 24% chance of a rate cut by the end of the year, slightly below expectations earlier in the day.
Investors this week will be looking out for February's euro zone inflation figures, which are due Tuesday. Data out of Germany last week showed that inflation in the euro zone's largest economy unexpectedly fell to 2% in February, pushed lower by falling energy costs.
In January, euro zone inflation fell to 1.7% after hovering around the 2% target for much of 2025.
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