Key facts
- Euro zone government bond yields reached multi-year highs due to inflation and spending worries.
- Oil prices surged, increasing inflationary concerns and the likelihood of central bank rate hikes.
- Germany's 10-year yield hit a 15-year high, while French and Italian yields also reached significant milestones.
- Germany's 10-year debt auction saw lower-than-expected demand.
- Traders are pricing in approximately 45 basis points of further ECB tightening this year.
Euro zone government bond yields continued their ascent, hitting fresh multi-year highs as concerns over inflation and high public spending intensified. Oil prices surged again, with Brent crude reaching its highest level since late July at $92.38 a barrel, further fueling worries about inflationary pressures that could compel central banks to raise interest rates. Germany's 10-year yield climbed to a 15-year high of 3.275%, while French 10-year yields surpassed 4.13% and Italian 10-year yields rose above 4.1%, levels not seen since 2008 and March, respectively. Analysts cited debt sustainability concerns and the geopolitical situation involving Iran as key drivers of the selloff. Germany's auction of €3.8 billion in 10-year debt saw softer demand than anticipated. Money markets are now pricing in approximately 45 basis points of further European Central Bank monetary tightening this year. The U.S. Treasury market remained relatively calm, with the 10-year yield down slightly at 4.7%, limiting the extent of the global bond selloff.