Euro zone bond yields near multi-year highs as selloff eases
TLT•U.S. Treasury move and ECB tightening expectations
The selloff in bonds accelerated on Wednesday after upbeat business activity in the euro zone and the United States.
The yield on the 10-year U.S. Treasury US10YT=RR rose as much as 16 basis points to its highest since July 2007, its sharpest daily increase since the so-called Liberation Day market rout in 2025.
"The combination of a continued strong economy together with high energy prices lifts expectations of policy rate hikes further," said SEB economist Marcus Widén.
Money market futures were pricing in 35 basis points of tightening from the ECB by the end of the year, implying one quarter-percentage-point hike and a roughly 40% chance of a second.
Germany's two-year yield DE2YT=RR, which is sensitive to changes in ECB policy expectations, was flat on Thursday at 3.288%.
France under scrutiny as spread over Germany widens
France has been in the spotlight as it heads towards a 2027 election year with a substantial primary deficit and budget risks stemming from its fragmented parliament.
France's 10-year yield FR10YT=RR was little changed on Thursday at 4.655%, after it earlier touched its highest level in over 18 years.
The spread between French and German 10-year yields DE10FR10=RR widened to over 110 bps, its widest level since mid-2012. A widening spread is generally seen as a sign investors perceive greater risk in holding French government debt relative to Germany's.
Euro zone bond selloff slows, but yields remain elevated
A selloff in euro zone bonds slowed on Thursday but yields were still close to or trading at multi-year highs as upbeat activity data and elevated oil prices strengthened the case for further monetary tightening from the European Central Bank.
