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Euro zone bond yields edged lower but kept close to multi-week highs on Thursday as gas prices continued rising and investors await the minutes of the European Central Bank’s July meeting.

At that meeting the ECB raised interest rates by 50 basis points (bps) to 0%, double what it had previously guided, and launched a new bond buying scheme, the Transmission Protection Instrument (TPI), to limit a widening between highly indebted member states’ borrowing costs and Germany’s.

The minutes, expected at 1130 GMT, will shed light on the bank’s decision as markets try and gauge what its next move will be. They come as money markets are now pricing in 100 bps of ECB rate hikes by October.

A 50 bps hike is fully priced in for September, plus a small probability of a 75 bps move.

Those bets have recently risen significantly with another sharp rise in natural gas prices and Russia signalling further supply squeezes.

These have fuelled further inflation fears in the euro zone, where price growth rose to a record high of 8.9% in July, more than four times the ECB’s 2% target, and triggered hawkish rhetoric from ECB policymakers.

On Thursday, by 0736 GMT, Germany’s 10-year yield was down around 2 bps to 1.35% after touching 1.39% at the start of the session, the highest since early July that it first rose to on Wednesday.

Euro zone bond yields close to recent highs, focus on Fed

Italy’s 10-year yield was also down 2 bps to 3.65%, with the closely watched risk premium over German peers at 229 bps, below near one-month highs hit earlier in the week over 230 bps.

Gas prices continued rising on Thursday, with the Dutch contract for September delivery rising another 4.5% to 313.50 euros.

“The bearish market backdrop looks set to extend with possibly hawkish ECB minutes and Fed anxiety ahead of Jackson Hole.

A weaker Ifo should provide only limited support,“ Commerzbank strategists Hauke Siemssen and Rainer Guntermann told clients.

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