Euro zone bond yields jump again as oil prices surge, French spread widens
TLT•Euro zone bond yields rose sharply as oil climbed 5% to $105 a barrel, intensifying inflation concerns. France’s 10-year yield rose 9 basis points to 4.961%, while its spread over Germany widened 4 basis points to 142 basis points.
1. Oil fuels yield gains
Euro zone government bond yields rose sharply on Thursday as a 5% surge in oil prices intensified inflation concerns and investors sold bonds from heavily indebted countries. Brent crude reached $105 a barrel, its highest in more than a week, as investors worried about Middle East supply disruptions.
2. French debt premium widens
France’s 10-year bond yield rose 9 basis points to 4.961%, near the 24-year high of 4.994% touched on Friday. The spread between French and German 10-year yields widened 4 basis points to 142 basis points, after reaching almost 160 basis points last week, its highest level since 2012. Investors have scrutinised France’s debt load, budget deficit and political outlook ahead of the 2027 presidential election.
3. German bonds outperform
Germany’s 10-year yield rose 5 basis points to 3.534%, a smaller increase than in many neighbouring markets, as German debt benefited from safe-haven demand. US 10-year Treasury yields rose 7 basis points to 5.349%, while Germany’s 2-year yield gained 5 basis points to 3.085% as traders increased bets on further European Central Bank rate hikes.
