European flag. (Credit: Illustration photo by Georges Gobet/AFP)
Euro zone government bond yields were a touch lower on Tuesday, in line with softer oil prices following a sharp selloff the previous day, with investors focused on developments in the Strait of Hormuz.
Germany's 10-year bond yield, the benchmark for the euro zone was down 1 basis point at 3.07% after a 5 bp jump the previous session.
Government bond market traders are closely tracking the situation in the Gulf as they assess when central banks will be forced to raise interest rates to prevent sky-high energy prices spilling over into broader inflation.
The European Central Bank kept rates unchanged last week, but it debated a rate hike and signalled that policy tightening might be necessary in June.
Bond yields rose sharply on Monday driven by a jump in oil prices after the U.S. and Iran launched new attacks as they wrestled for control of the Strait of Hormuz.
Brent crude futures retreated on Tuesday but held near $114 a barrel.
Germany's rate-sensitive two-year yield was down 2 basis points at 2.69%, just off last week's one-month high of 2.76%.
