European bond yields reached fresh multi-year highs on the final trading session of August, led by Germany’s 10-year Bund at 3.3%, its highest level since May 2011. Higher oil prices, following reported U.S. and Iranian attacks around the Strait of Hormuz, and a more hawkish Federal Reserve outlook reinforced expectations for tighter monetary policy. Markets are pricing the European Central Bank’s deposit rate at about 2.70% by December, implying roughly an 80% chance of a second hike after an expected move as early as September from the current 2.25%. Investors are also positioning for euro-area rates to approach 3% by late 2027, while markets assign roughly a 60% probability to a September Federal Reserve hike after Fed Chair Kevin Warsh said inflation has not slowed meaningfully and the central bank still has “work to do.”