The German 10-year bond yield hit its highest in 15 years on Thursday, while the 2-year yield reached a two-year high, as traders bet that rising oil and gas prices will force the European Central Bank to tighten monetary policy more aggressively, a trend the bank may reinforce at its upcoming meeting.

The European Central Bank is almost certain to keep interest rates unchanged when it meets later on Thursday, but it will leave the door wide open for another rate hike in September, as oil prices return above $90 a barrel and gas prices rise by about 50 percent since the start of July, according to Reuters.

Ahead of the meeting, the German 2-year bond yield, which is highly sensitive to ECB policy expectations, rose 4 basis points on the day to 2.88 percent, its highest since July 2024.

The German 10-year bond yield, which also reflects traders' expectations for long-term economic prospects, rose 2 basis points to 3.20 percent, exceeding the May peak and hitting its highest since 2011.

Despite the rise in energy prices and the risk of spillover into broader inflation, markets see only a one-in-five chance of the ECB raising rates at today's meeting. However, they see a four-in-five chance of a rate hike at the September meeting and a nine-in-ten chance of an additional increase by year-end.

Michel Tocker, senior interest rate strategist at ING, said: 'It can be argued that there is a case for a preemptive rate hike today, but the ECB in past years has always fully hinted at any policy changes in advance.'

He added: 'With markets not pricing in any rate hike at the moment, it seems unlikely the bank will deviate from this strategy.'

Other eurozone bond yields also rose, with the most indebted countries' yields posting slightly larger increases compared to Germany.

The French 10-year bond yield rose 2 basis points to 4 percent, its highest since 2009. The Italian yield also rose 2 basis points to 4.04 percent, though it remains below its highs recorded in March.

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