European Central Bank's "hawkish" return, interest rate hike expectations from 0 to 100%

DeepFlowTech · 2026-03-06T10:03:23+00:00

As the impact of the Iran war on inflation becomes apparent, market consensus shifts, with a 100% likelihood that the European Central Bank will raise interest rates. This change has led to a sharp increase in German government bond yields, and similar trends are also seen in other markets such as the United States, reflecting a change in global interest rate expectations.

DeepFlowTech

2026-03-06 10:03:23

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Deep Tide TechFlow News, March 6 — A week ago, anyone betting on a European Central Bank rate hike seemed isolated and stubborn; now, with the threat of war in Iran impacting inflation trends, this trade has become market consensus. Currency market data shows a 100% probability of the ECB raising rates this year, a dramatic reversal from a week ago when the chance of rate cuts was higher than hikes. This shift is driving Germany’s government bonds to their worst performance in three years, with the two-year German bond yield, sensitive to interest rates, soaring 30 basis points since last Friday’s close to 2.30%.

The speed of this shift is reflected across markets in the U.S. and globally. In the U.S., options traders are increasingly betting that the Federal Reserve will abandon any rate cut plans this year. The 10-year U.S. Treasury yield has surged over 20 basis points to 4.16%, with similar increases seen in Australian, Canadian, and UK government bond yields. Lucile Flight, Managing Director of Rate Trading at Barclays, said, “The ECB’s sole responsibility is to maintain price stability. In my view, they will respond decisively to energy price shocks.” (Jin10)

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