LONDON: German bond yields edged up as oil struck a seven-month high on Tuesday, giving a boost to inflation that analysts expect to see evidenced in data from the world's largest economy, the United States, later in the day.
Crude prices have rallied for most of the past two weeks with markets focused on supply disruptions that on Monday prompted long-time oil bear Goldman Sachs to issue a bullish assessment on near-term prices.
This recovery was seen lifting stock markets and global bond yields, with Europe's benchmark Bund yields up 2 basis points at 0.16 percent, pulling away from 2016 lows of 0.075 percent.
Most other highly-rated euro zone bond yields were slightly up on the day.
Analysts said further yield rises may be in the offing if, as expected, the US posts headline annual inflation rates back above 1 percent again and core rates above 2 pct.
"The renewed surge in crude-oil quotations ought to turn out to have put distinct upside pressure on US inflation in April," DZ Bank strategist Hendrik Lodde said.
Back in the euro zone, any hints that a surge in the oil price may start to lift near-zero inflation will be welcome news for the European Central Bank, which is facing growing criticism of its ultra-easy monetary policy.
Germany's Constitutional Court confirmed on Tuesday it has received a complaint against the ECB's monetary policy. A weekend newspaper report said the ECB had been accused of overstepping its mandate by extensively buying government bonds and with its plan to start buying corporate bonds.
German politicians have also loudly complained about the ECB's low-interest rate policy in recent weeks, with Finance Minister Wolfgang Schaeuble partly blaming its policies for the rise of the right-wing Alternative for Germany party.
ECB Governing Council member Jens Weidmann said recent criticism may be the result of some measures having blurred the lines between monetary and fiscal policy.
Investors are eagerly awaiting minutes of the ECB's last policy meeting due on Thursday to see if this criticism is having any impact on the ECB's appetite for further easing.
"The stakes are certainly getting high but they can't give the impression at this moment that they are giving up," Credit Agricole strategist Orlando Green said.
There are also signs that the ECB's bond-buying scheme may be running into some snags. Central banking sources told Reuters that the ECB limited its buys of Portuguese and Irish debt last month due to concerns about hitting its purchase caps.
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