Germany: Eurozone Bond Yields Rise as ECB Rate Hike Bets Grow.

Eurozone government bond yields continued to rise, with global debt markets heading for their worst weekly selloff since the start of the Iran war as surging energy prices fuel inflation concerns. Germany’s 10-year Bund yield climbed above 3.5%, its highest since August 2009, while Italian yields reached their highest since late 2023 and French yields hit 18-year highs. The European Central Bank raised rates by 25 bps on Thursday, warning that inflation could remain well above its 2% target for an extended period. President Christine Lagarde called the hike a “no-brainer” and said the return to target, currently expected by the end of 2027, could be delayed further. The inflation outlook has deteriorated so sharply that further monetary tightening is now considered increasingly likely, according to sources familiar with the discussions, with another rate hike potentially coming as soon as October. Markets are now pricing three more ECB hikes by March, followed by another by June.