Euro zone yields rise, gap between German and US borrowing costs smallest in a month

Euro zone yields rise, gap between German and US borrowing costs smallest in a month explains market moves in European and U.S. rates on July 16. Reuters reports from London that the spread between German and U.S. 10-year borrowing costs sat near its tightest level in a month, while euro zone yields rose. Germany’s 10-year yield ended up 1 basis point at 3.13%, its highest since May 20, with increases of 9 bps for the week and 26 bps for July. Traders linked the shift to escalating Gulf fighting between Iran and the U.S., raising concerns about higher oil and gas prices and renewed inflation pressure. With cooler U.S. inflation prints, the 10-year U.S. Treasury yield finished at 4.56%, up 2 bps on the day but flat on the week. Market pricing suggested about a 90% chance the ECB raises rates in September, with a good likelihood of a third move by year-end.