EUR 10 Year IRS Interest Rate Swap

According to the August consumer expectations survey published by the European Central Bank on the 18th, eurozone consumers' inflation expectations rose slightly, apparently reflecting a renewed sharp surge in fuel prices caused by the intensifying conflict in Iran. The median expectation for inflation over the next 12 months came to 3.0%, up from 2.9% in July. The median expectation for three years ahead rose from 2.7% to 2.9%, and the five-year expectation rose from 2.4% to 2.5%. The ECB carried out its second rate hike of the year last week, and according to sources who spoke to Reuters, policymakers expect further rate increases in the coming months.

The euro traded little changed against the US dollar on Wednesday, hovering around 1.1537 and not far from Monday's one-month low of 1.1523, as traders avoided strong directional bets before the Federal Reserve's policy announcement. The Fed is expected to raise rates by 25 basis points at 18:00 GMT, lifting the federal funds target range to 3.75%-4.00%, with Chairman Kevin Warsh due to speak at 18:30 GMT. The dollar held firm near two-week highs, with the US Dollar Index around 99.70, after August Retail Sales rose 1.2% month-on-month, beating expectations of 0.8% and rebounding from a revised 0.5% decline in July, while CPI rose 0.4% on the month and annual inflation held at 3.4%. With the quarter-point move almost fully priced in, attention turns to the updated Summary of Economic Projections and its dot plot, after June's median year-end rate projection of 3.8%, and to Warsh's comments on the policy path. Across the Atlantic, the European Central Bank has raised rates twice this year and markets expect more tightening, though BNY analysts said the Governing Council will likely decide meeting by meeting after September, with opinions split between waiting until December and acting preemptively as energy prices rise.

Several European Central Bank policymakers said on the 14th that euro-area inflation could exceed an already raised forecast, expressing strong concern about the recent rise in energy prices, especially the sharp surge in natural gas. The ECB decided to raise interest rates at last week's Governing Council meeting and revised up part of its inflation outlook, but crude oil and natural gas prices are running above the levels assumed at that time, suggesting that high inflation may persist longer than expected. Executive Board member Isabel Schnabel said in Berlin that recent energy price developments are extremely concerning, noting that prices of refined products such as diesel have risen alongside crude oil, and that natural gas prices, which are especially important for Europe, have reached very high levels. In the ECB's economic projections, the base scenario assumed December natural gas futures at 60.1 euros per megawatt-hour and the adverse scenario at 77 euros, but current market prices exceed 83 euros, while North Sea Brent crude is around 107 dollars a barrel, also above the ECB's adverse scenario assumption. Slovak central bank chief Peter Kazimir said inflation risks are clearly tilted to the upside, and Latvian central bank chief Martins Kazaks told Reuters that the case for further monetary tightening is strengthening and that there is no special hurdle to raising rates above 2.5 percent. The ECB is scheduled to hold its next Governing Council meeting on October 29, with markets pricing in about a 60 percent probability of another rate hike at that meeting and seeing further increases this year as nearly certain.

In European markets on the 14th, the German 10-year bond yield rose by more than 4 basis points to 3.5544%, its highest level in over 17 years. Inflation concerns driven by higher crude oil prices and rising bond yields weighed on the market, with the STOXX Europe 600 falling 0.49% to 635.99, Germany's DAX down 0.50% to 25,440.81, and France's CAC 40 down 0.76% to 8,117.78. Meanwhile, London's FTSE 100 extended its gains, rising 0.44% to 10,697.57, as pharmaceutical and consumer staples stocks were bought. GSK rose 4.7% after announcing positive trial results for two lung cancer treatments, while data analytics firm GlobalData fell 18.7% after its full-year revenue forecast fell short of market expectations. Expectations are growing in the market that major central banks will raise interest rates within the year, with the ECB expected to implement at least one more rate hike this year, and markets fully pricing in two 25 basis point hikes by February 2027.

The US Producer Price Index, or PPI, rose 5.4% year-on-year in August, above expectations of 5.3% and accelerating from 4.8% in July. Core PPI rose 4.6%, in line with forecasts, after a 4.3% gain the previous month. As a result, the Dow Jones closed at 52,064.10 points, down 316.56 points, or 0.60%. The S&P 500 closed at 7,591.70 points, down 44.66 points, or 0.58%, and the Nasdaq closed at 26,081.73 points, down 171.62 points, or 0.65%. Meanwhile, WTI and Brent crude both surged past 100 dollars per barrel as Iran continued to attack oil tankers passing through the Strait of Hormuz and Iran-backed Houthi rebels seized control of the port of Mokha in Yemen. In Europe, the STOXX 600 closed at 635.97 points, down 4.44 points, or 0.69%, after the European Central Bank, or ECB, raised interest rates by 0.25% to 2.5%, its second hike this year. Asian markets opened broadly lower, with Japan's Nikkei posting the region's biggest opening drop at 1.52%, followed by South Korea's KOSPI down 2.7%, Hong Kong's Hang Seng down 0.95%, Australia's S&P/ASX 200 down 1%, and China's Shanghai Composite down 0.60%. Thailand's stock market is expected to trade sideways down in line with overseas markets. The stock to watch today is WHA, which is preparing to develop a 1,000-to-2,000-rai Data Center Park dedicated to data centers, with clarity expected within this year. The company remains confident land sales will meet its target of 2,500 rai after already achieving more than 1,000 rai in the first half.

European Central Bank President Christine Lagarde said euro-area inflation is likely to remain elevated for longer than previously expected, as the Iran war keeps pressure on energy prices. "The current shock is longer-lasting," Lagarde told Ouest-France in an interview published on Saturday, warning that continued conflict in the Middle East could keep energy markets volatile and prices elevated even as higher costs threaten economic growth. Her comments followed the ECB's second interest rate increase since the Iran war drove oil and gas prices sharply higher, lifting the deposit rate to 2.5%, with euro-area inflation currently above 3% and policymakers expecting further tightening may be needed to return price growth to the ECB's 2% target. New ECB projections released Thursday raised inflation forecasts for 2027 and 2028, with price growth in 2028 now expected to sit slightly above the central bank's target, while growth projections were also increased as the economy proved more resilient to the conflict and U.S. trade policies. Bundesbank President Joachim Nagel said Friday that borrowing costs may need to move into mildly restrictive territory to bring inflation under control, and Lagarde also flagged the possibility of a correction in elevated artificial intelligence sector valuations, called for planned French structural reforms to be implemented, repeated her opposition to canceling government debt held by central banks, and played down the prospect of running in France's presidential election while reiterating that she plans to leave the ECB next year.

The European Central Bank raised all three of its key interest rates by 25 basis points, taking the deposit rate from 2.25% to 2.5%, the main refinancing rate to 2.65% and the marginal lending rate to 2.9%. It was the ECB's second rate increase of 2026 following another quarter-point move in June. The central bank now expects headline inflation to average 3% in 2026, 2.5% in 2027 and 2.1% in 2028, with underlying inflation also seen above its 2% target throughout the forecast period, as rising energy prices tied to Middle East conflict push costs higher. The ECB raised its growth forecast to 0.9% for 2026 and 1.4% for 2027, citing better-than-expected resilience, stronger manufacturing and investment linked partly to defense, infrastructure and AI. Markets are roughly split on another increase at the October meeting and assign a much higher probability to at least one more hike before the end of the year, with some chance the deposit rate reaches 3% by Christmas.

The European Central Bank raised rates by a hawkish 25 basis points to 2.50%, a move President Lagarde called a "no brainer" while signaling further hikes ahead. According to Brown Brothers Harriman's Elias Haddad, EUR/USD is trading heavy around 1.1600 following the decision. The ECB expects inflation to remain above target for an extended period, which underpins its tightening path. BBH sees that hawkish stance as supportive of the currency pair.

Joachim Nagel, Bundesbank president and member of the European Central Bank's Governing Council, said on the 11th that if the surge in energy prices caused by the war continues, the ECB may need to raise interest rates further to a level that gently restrains the economy. He noted that the ECB has already raised its policy rate to the upper end of the neutral range, which neither stimulates nor restrains the economy, but said further increases may be necessary. In an interview with CNBC, Nagel said, "I would not rule out that we have to enter mildly restrictive territory, but that depends very much on how energy prices develop and perhaps on how the inflation picture changes over the next month or so."

The European Central Bank, or ECB, decided to raise interest rates by 0.25%, its second hike this year, bringing the deposit rate to 2.50%, the lending rate to 2.90% and the refinancing rate to 2.65%, effective September 16, 2026. It also signaled that it may continue raising rates, with another increase possible as early as October, after war in the Middle East pushed inflation higher and it looks set to stay above the 2% target for a prolonged period. The ECB still expects eurozone inflation at 3.0% this year, 2.5% in 2027 and 2.1% in 2028, while core inflation excluding food and energy prices is expected at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. The eurozone economy is expected to expand 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028, with growth forecasts for both 2026 and 2027 revised upward. After the meeting, investors priced a 70% chance that the ECB will raise rates in October, up from around 50% previously. However, sources commented that the market's view that the ECB will hike three more times may be excessive, and that December could be a more appropriate time, since the December meeting will publish a new set of economic projections covering 2029. Eurozone inflation recently hit its highest level in nearly three years, making the ECB the most hawkish central bank among the G7 countries. Economists at Bloomberg Economics believe the camp favoring tighter monetary policy is gaining influence, and based on the ECB's estimates of the neutral rate, the deposit rate may need to rise by at least 2.75%.

Nordea analysts Jan von Gerich and Tuuli Koivu said the European Central Bank delivered a 25bp rate hike and signalled a bias toward further tightening, with two more hikes remaining the baseline. The analysts noted the ECB's projections show Eurozone inflation above target through 2028. The signal of a tightening bias accompanied the rate decision as the central bank weighs persistent price pressures.

The European Central Bank is expected to resume interest rate hikes in September, raising the interest rate on the Main Refinancing Operations and the Deposit Facility by 25 basis points to 2.65% and 2.50%, respectively. The decision is driven by rising inflation and energy risks. The ECB will announce the decision on Thursday at 12:15 GMT.

The euro is holding steady against the pound, hovering around 0.8580 during European hours on Wednesday, as markets fully price in a 25-basis-point rate hike by the European Central Bank to 2.5% on Thursday. Surging energy prices driven by the US-Iran conflict are fueling the expected decision, with Eurozone inflation rising above 3% in August. Meanwhile, Bank of England Governor Andrew Bailey stressed that global conflicts are driving energy prices higher, keeping UK inflation risks elevated and supporting pound resilience on dips. ING's global head of macro, Carsten Brzeski, said, "We expect the ECB to hike rates by 25 basis points. Another insurance rate hike," adding, "Or for those who don't like this term: a dovish rate hike."

Global financial markets are closely watching the European Central Bank (ECB) meeting in September, with expectations of a 0.25% interest rate hike, driven by accelerating headline inflation from energy prices. However, what matters more is the direction of rates after September and whether the ECB will view the new rate level as sufficient to bring inflation back to its 2% target or if further hikes are needed. There are 10 key variables to monitor, including the new economic projections, the stance of ECB President Christine Lagarde, risks from natural gas prices passing through to electricity costs and production costs, and the transmission of monetary policy. Notably, gas prices are a major trigger, as Europe's gas reserves are at their lowest in five years, posing risks of supply shocks. Meanwhile, analysts at Yuanta Securities maintain a Slightly Underweight stance on European equities over the next 12 months, citing tight valuations relative to earnings potential, and recommend a Value Play strategy over broad index investment.

The European Central Bank (ECB) will hold its regular governing council meeting in Berlin, Germany, on the 9th and 10th to discuss monetary policy. With the resumption of fighting between the US and Iran making the Middle East situation uncertain, concerns about inflation due to persistently high energy prices have resurfaced, and expectations are growing that the ECB will raise interest rates for the first time in two meetings since June. At the meeting, it is expected that the deposit rate, the key policy rate, will be raised by 0.25 percentage points to 2.50%. The eurozone consumer price index rose 3.3% in August, accelerating from the previous month. The ECB decided to raise rates in June for the first time in about two years and nine months, but kept them unchanged in July. In the minutes published on August 28, the need for an early additional rate hike was pointed out due to concerns about a resurgence of inflation. Executive Board member Isabel Schnabel also said that "the likelihood of inflation returning to target in the medium term is low, and further tightening is necessary," and market expectations are largely leaning toward a rate hike to hedge against inflation risks.

This week, the US Treasury will expand its long-term bond buybacks from the 9th through November 4th, and President Trump and Vice President Vance will address the Republican National Convention ahead of the midterm elections. Markets are focused on the August US CPI and PPI, which are crucial for the September FOMC policy decision. Headline CPI is expected to rise 0.40% month-over-month due to higher gasoline prices, while core CPI is forecast to rise 2.4% year-over-year, the slowest pace since 2021. August PPI is expected to accelerate due to rising energy prices. Due to changes in the PCE calculation methodology, portfolio management fees will no longer reflect PPI, but new PPI components will be reflected in software and legal services. The European Central Bank is expected to raise interest rates at its regular governing council meeting, with attention on President Lagarde's press conference. The yen is expected to remain firm on expectations of a Bank of Japan rate hike and caution over intervention to correct yen weakness.

A growing divergence in European government bond yields is raising a hidden risk for financial markets, with borrowing costs in major Western European economies climbing toward levels last seen nearly two decades ago, KB Securities said. Ten-year government bond yields in major Western European countries have already moved above their 2023 peaks and are approaching their 2007 highs, while the U.S. 10-year Treasury yield, although above 4.8%, remains below its 2023 peak. The more important concern is the widening gap between Western and Southern Europe: yields in France and Germany have risen sharply, while those in Spain and Italy remain below their 2023 peaks and have increased at a more moderate pace. KB Securities attributes the divergence to fiscal positions, with France and Germany expected to run budget deficits of about 5% to 6% of GDP next year, compared with 2% to 3% for Spain and Italy, which keeps the latter within the EU's 3% fiscal-deficit threshold. The divergence echoes the period before the 2011 euro zone sovereign debt crisis, but KB Securities does not see an imminent crisis, noting that the bigger risk could emerge when the economic cycle turns lower, making the next downturn a key test for European markets.

Among the economic indicators scheduled for release this week, speculation over monetary policy in Japan and the US is likely to sway the foreign exchange market. The second preliminary GDP estimate for the April-June quarter, due on the 8th, is expected to be revised upward to an annualized 1.8% quarter-on-quarter growth, and an upward surprise would support expectations of further rate hikes by the Bank of Japan, leading to yen buying. On the 10th, the ECB is expected to raise its policy rate by 0.25 percentage points, with the focus on President Lagarde's press conference. The UK's July GDP, due on the 11th, is expected to slow to 0.1% month-on-month, and the pound could react depending on the outcome. The US August CPI is expected to accelerate to 0.4% month-on-month, with core at 0.2%, and will be a key factor in the Fed's rate-cut decision at the FOMC.

CNBC reports that global bond markets are facing heavy selling pressure, pushing bond yields to multi-year highs and raising borrowing costs across the economy—from governments and businesses to households—amid signs that the world may have to live with expensive money for years to come. Germany's 10-year bond yield has risen to its highest level since 2011, while Japan's stands above 3%. The U.S. 10-year yield has hit its highest level since November 2023, and the UK's has reached its highest since the 2008 financial crisis. The bond sell-off is driven by several factors, including heavy government bond issuance, rising oil prices, and expectations that central banks worldwide may maintain tight policies longer than anticipated. Robin Brooks, a senior fellow at the Brookings Institution, views this as a medium-term trend that could persist for several years. Governments with high debt and large deficits, particularly France and Japan—which have debt exceeding 200% of GDP—will be especially vulnerable. Businesses, especially small companies and the commercial real estate sector, will face higher refinancing costs, while low-income households will feel the impact first from increased debt burdens. Deutsche Bank estimates that the U.S. 10-year bond yield could rise to 5.5% within a year and 6.4% within two years, which would make total returns on holding bonds negative. Overall, if the world enters a high-interest-rate era, the heaviest burden will fall on highly indebted governments, companies reliant on borrowing, and low-income households, while investors holding cash may benefit from higher returns.

Danske Bank reports that EUR/USD slipped below 1.1600 as the US Dollar strengthened on a hawkish Federal Reserve stance and geopolitical tensions. The bank notes that Euro area inflation has moved back above 3%, reinforcing expectations for a September ECB rate hike.

Global bond markets were hit by heavy selling on Tuesday, pushing bond yields worldwide higher amid concerns over inflation and government debt burdens. Japan's 10-year bond yield touched 3% for the first time since 1996, while Germany hit a 15-year high and the UK reached its highest level since 2008. In the US, the 10-year yield rose 3.8 basis points to 4.796%, near its 2023 peak. Surging government debt, particularly in the US where it has reached $40 trillion, has investors worried about potential structural issues. Meanwhile, geopolitical conflicts are adding upward pressure on energy prices. David Krakauer from Mercer Advisors noted that the main drivers are domestic to the US, such as deficit spending and higher debt servicing costs. Several governments are beginning to show concern, with the US Treasury intervening in the market in August to curb the rise in yields. Additionally, massive bond issuance by tech companies to fund AI is adding further pressure on the market.

Commerzbank economist Dr. Vincent Stamer says the Euro area's headline inflation rose to 3.3% in August from 2.9% in July, driven mainly by higher energy prices linked to the Middle East conflict, a development that supports the European Central Bank's decision to hike interest rates.

European Central Bank Governing Council member and Austrian Central Bank Governor Robert Holzmann said on Monday that upside risks to inflation have recently increased, and if this is confirmed by the ECB's next projections, a prompt rate hike would be necessary. In a statement following the monthly inflation data, the governor noted that 'upside risks to inflation have recently increased again across the euro area as a whole,' and added, 'If this situation is confirmed by the ECB's next projections, I believe a further rate hike will be needed in the near term.'

The European Union's statistics office reported on Tuesday that the eurozone's flash consumer price index (HICP) for August rose 3.3% year-on-year, accelerating from 2.9% in July and returning above the 3% mark, driven by higher energy costs. Nearly all of the increase was due to energy prices, with rises in crude oil and natural gas and wider refining margins contributing. Meanwhile, core inflation, which excludes volatile food and energy prices, slowed to 2.4% from 2.5% the previous month, and services inflation also eased to 3.0% from 3.3%. The data broadly aligns with the European Central Bank's outlook and suggests that the widely expected rate hike to 2.50% at the governing council meeting on the 10th will be a relatively straightforward decision.

Eurozone inflation accelerated to 3.3% in August, the highest level since September 2023 and well above the European Central Bank's (ECB) 2% target, prompting investors to increase bets that the ECB will raise interest rates by 0.25 percentage points at its meeting on September 10. Data from Eurostat showed headline inflation accelerated from 2.9% in July, while core inflation eased slightly to 2.4% and services inflation fell to 3%. The main pressure came from higher oil and gas prices due to the Iran war, with Italy's inflation accelerating to 3.2%, Spain surging to 4.5%, while Germany and France also saw increases. ECB board member Isabel Schnabel said borrowing costs need to rise further, while Austrian central bank governor Martin Kocher said another rate hike is necessary in the near future. If the ECB raises rates next week, it would further cement its status as the most hawkish central bank among the G7. The current deposit rate stands at 2.25% and may need to rise to levels that restrict economic activity, with the ECB's chief economist previously indicating that 2.5% is the upper bound of the neutral rate range.

Commerzbank analyst Michael Pfister says the European Central Bank's proactive rate hikes in response to the inflation shock from the Iran conflict are supportive for the euro. Several central banks, including the ECB, have already raised rates, which Pfister views as a positive factor for the currency.

European Central Bank (ECB) board member Drenk said that the likelihood of a rate hike in September has increased. This statement suggests that the ECB is considering additional monetary tightening amid persistent inflationary pressures. The market is closely watching the ECB's next policy decision, and Drenk's remarks have strengthened expectations of a rate hike.

Eurozone bank lending to both businesses and households accelerated in July. The European Central Bank (ECB) raised interest rates in June for the first time in about three years. Loans to non-financial corporations grew 4.4% year-on-year, up from 4.0% in June. Household lending increased 3.1%, up from 3.0% in June.

BNY's Geoff Yu highlights that European Central Bank Executive Board member Isabel Schnabel sees further rate hikes as necessary, with Euro area inflation risks still tilted to the upside and growth more resilient than expected. This hawkish stance from the ECB provides support for the Euro against the US Dollar, as the market anticipates continued monetary tightening from the central bank.

European Central Bank (ECB) Executive Board member Isabel Schnabel said in an interview with Bloomberg News published on the 26th that interest rates need to be raised further, as the prolonged Middle East conflict and the resilience of the euro zone economy pose upside risks to inflation. She stated, "At the current level of policy rates, it is unlikely that inflation will return to target in the medium term, so further tightening will be necessary."

The European Central Bank (ECB) plans to raise interest rates at its September meeting to address economic pressures from the Iran war, with the policy rate expected to increase to 2.50% from 2.25%. This follows the first rate hike in nearly three years in June, aimed at preventing soaring energy prices from spilling over into other parts of the economy. The rate increase has been reflected in the ECB's economic projections since June, with policymakers viewing it as necessary to avoid a repeat of the severe inflation seen after Russia's invasion of Ukraine in 2022. Key drivers of inflation include surging natural gas prices and persistently high fuel prices at the pump. With inflation near 3% and the conflict in Iran ongoing, coupled with a still-strong eurozone economy, the ECB's Governing Council deemed it necessary and appropriate to raise rates again. However, the ECB has not signaled further hikes beyond the September meeting.

A global bond selloff that pushed yields to two-decade highs has made government debt the main concern on Wall Street, overshadowing the AI boom. Yields surged in the U.S., U.K., France, Germany, and Japan as investors lost patience with persistent deficits and heavy government borrowing. The Treasury Department announced increased buybacks of long-dated bonds, but yields resumed their climb as investors doubted the move would stem the tide. Economists including RSM's Joseph Brusuelas and Capital Economics analysts said markets are now demanding higher term premiums for fiscal, geopolitical, and policy uncertainty, and warned that continued populist spending and tax cuts could eventually trigger banking or currency crises.

S&P Global reported on the 21st that the flash eurozone composite purchasing managers' index for August came in at 52.1, up from 52.0 in July and the highest since last November. It also beat the Reuters consensus forecast of 51.7, with new orders growing at the fastest pace in 40 months and export orders, including those within the eurozone, rising for the first time since February 2022, when Russia invaded Ukraine. The manufacturing PMI rose to 52.8 from 51.9, the highest in more than four years, and output growth reached its strongest in 54 months, while the services PMI was unchanged at 51.7. Employment increased for the first time this year, with manufacturing resuming hiring after more than three years and services posting the fastest growth in eight months. Price pressures remained elevated but were easing, with input cost growth at a six-month low and output price inflation slowing to a five-month low. Chris Williamson, chief business economist at S&P Global Market Intelligence, said that given solid business sentiment, a recovering labour market and sticky inflation, the European Central Bank is likely to maintain a hawkish bias and cannot rule out a rate hike in the near term.

Bond markets around the world are facing one of the largest selloffs of long-term government bonds in history, pushing yields sharply higher and driving long-term borrowing costs for governments and the private sector to their highest levels in a decade. In the United States, the yield on the 30-year Treasury bond climbed to 5.32 percent, its highest level since mid-2007, while French government borrowing costs surged to 4.87 percent, the highest since 2008. German and UK government bonds also hit multi-year highs, and Japan saw yields rise close to 4.07 percent. The main factors driving this crisis include geopolitical risks that are pushing energy prices higher, persistent inflation that is forcing central banks to keep interest rates elevated for longer, and concerns about fiscal discipline among governments that are issuing large amounts of debt. At the same time, the structure of global bond holders is changing, as pension funds and the public sector reduce their holdings of long-term bonds and shift more into equity markets. This leaves the market more reliant on price-sensitive private investors, raising the risk premium for holding long-term bonds, and the higher interest burden will be passed on to businesses and households through more expensive borrowing costs.

Global bond yields have reached levels last seen in July 2008, before Bitcoin existed, and the cryptocurrency is not benefiting. A Bloomberg gauge of long-dated government debt hit its highest yield since July 2008 in May, while Bitcoin has fallen 46% over the past year compared with gold's 32% rise. UK 10-year gilts pay 5.05%, Germany sits at 3.21%, and Japan pays 2.88% after decades near zero. The US 10-year real yield reached 2.41% on August 14, meaning investors can now beat inflation with government debt and take almost no risk, while Bitcoin pays nothing. Barclays strategist Patrick Coffey attributed the move to fiscal realities, persistent inflation risks, and political uncertainty.