Germany’s 10-year Bund yield rose back above 3.6%, approaching its highest level since June 2009, after briefly retreating toward 3.55% from a 17-year high of 3.65% reached earlier in the week. A deepening energy shock strengthened expectations for further European Central Bank (ECB) rate increases through 2027, reversing the late-September improvement that followed lower oil prices and comments from central-bank officials. French bond yields also reached an 18-year high after their largest quarterly increase in nearly four decades, ahead of the government’s budget announcement. Higher borrowing costs are raising concerns about debt affordability in the euro area’s most indebted economies, while political uncertainty ahead of elections, including the 2027 elections, is adding pressure to fiscal outlooks. Money markets price the ECB deposit rate at about 2.8% by December, implying one further 25-basis-point hike and a 24% chance of a second increase, with the policy rate seen near 3.4% by late 2027.