German and UK government bonds gave back earlier gains, with oil prices recovering from initial declines as the outlook for negotiations to reopen the Strait of Hormuz remains uncertain.

Traders largely ignored the U.S. July inflation data, which was in line with market expectations. They now anticipate the European Central Bank will raise interest rates by 39 basis points by the end of the year, while the Bank of England is expected to hike by 28 basis points during the same period.

Brent crude oil edged down 0.1%, settling at $88.82 per barrel.

Market Overview

German 10-year bond yields remained largely unchanged at 3.15%.

German bond futures fell 4 points to 124.78.

Italy's 10-year bond yield dipped 1 basis point to 3.94%.

The yield spread between Italian and German 10-year bonds narrowed by 1 basis point to 78 basis points.

France's 10-year bond yield held steady at 3.98%.

The 10-year UK gilt yield was also little changed, trading at 4.97%.