James Hirai

German bond yields rose to the highest level since 2011 as surging energy prices and mounting inflation expectations fueled bets on interest-rate hikes ahead of the European Central Bank’s decision later Thursday.

Only last month, Andrew Bailey again insisted quantitative tightening is here to stay. The Bank of England governor has been adamant the UK central bank needs to keep slashing its bond holdings to clear the decks for the next crisis and take interest-rate risk off its balance sheet.

Treasuries head for their best win streak in a month, buoyed by a sharp retreat in oil prices on optimism that talks between the US and Iran will lead to the resumption of tanker traffic around the Arabian Peninsula.

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Treasuries are starting the week on an optimistic note, buoyed by tumbling oil prices and assurances that tens of billions of dollars in Japanese currency interventions won’t be funded from sales of US government debt.

Some of the world’s biggest central banks seem happy to let bond markets do their policy work for them.

A go-to trade in the UK gilt markets suggests investors are confident Prime Minister Andy Burnham will stick to his pledge to keep government borrowing in check.

Germany’s borrowing costs are poised to hit a 15-year high in a major sale of long-dated bonds as investors demand greater compensation for lending to increasingly indebted governments still grappling with inflation.

Treasuries fell as traders worried that rising oil prices will fan inflation and add to pressure on the Federal Reserve to raise interest rates.

Investors are piling into an arbitrage trade in euro money markets that’s gaining traction as the region’s financial conditions tighten.