Morgan Stanley expects Germany's 10-year government bond yield to rise to 1% by year-end, the bank said in a note on Tuesday.

The yield is currently around 0.58%.

Morgan Stanley said its forecast assumes the European Central Bank will end bond purchases in the third quarter. With inflation remaining above 6% towards year-end, it would raise interest rates by at least 25 basis points during the fourth quarter, the bank predicted.

It also expects Germany's 30-year yield to rise to 1% by the fourth quarter, from 0.71% currently.

However, scenario where euro zone inflation rises above 8% over the summer and declines to around 7% by Q4 could see 10-year yields rise even higher, to 1.5%, Morgan Stanley said.

On the other hand, if inflation were to peak in April and ease back to to 5% by end-2022, the 10-year German yield would be at 0.6% by the fourth quarter, similar to current levels, it predicted.

In that scenario, the ECB would end bond buying in September and only hike rates once, by 10 basis points, Morgan Stanley added.

(Reporting by Yoruk Bahceli; editing by Sujata Rao)