The European Central Bank sends a hawkish signal, limiting the rise of German bonds.

Driven by the rebound in market risk appetite, German bonds have experienced a rebound, but the hawkish comments released by the European Central Bank after raising interest rates on Thursday will likely dampen this round of gains. As mentioned by the author yesterday, the equilibrium level of the two-year bond yield is 2.65%, and this level is likely to remain unchanged. According to the updated macroeconomic forecasts by the European Central Bank, the inflation rate of the Eurozone's harmonized consumer price index will rise from the previous estimate of 2.6% to 3% this year. If the economic trend in the Eurozone meets this expectation, the European Central Bank still has ample room for further rate hikes. The ECB also predicts that the inflation rate will remain above 2% next year, and will not fall to the target level until 2028. In contrast, the impact on economic growth is relatively limited, with the GDP growth rate for the Eurozone this year slightly lowered from 0.9% to 0.8%. Following the ECB meeting, sources familiar with the matter stated that central bank officials do not rule out another rate hike at the next meeting on July 23. Joachim Nagel, a member of the ECB's Executive Board and President of the Deutsche Bundesbank, also stated that the ECB is prepared to continue raising interest rates next month "if necessary."