Euro zone yields rise, France and Italy spreads hit fresh multi-year highs
TLT•Euro zone yields were mixed after their biggest quarterly rise since 2022, while France’s bond yields reached an 18-year high. The France-Germany yield gap touched 128.80 basis points, its highest since June 2012, and Italy’s spread widened to its highest since June 2025.
1. Yields and rate expectations
Euro zone government bond yields were mixed on Thursday after their biggest quarterly rise since 2022, as a deepening energy shock supported bets on at least three European Central Bank rate hikes by late 2027. Germany’s 10-year yield rose one basis point, after reaching 3.6526% on Monday, while its 2-year yield was up 1.5 basis points at 3.21%.
2. French and Italian spreads
France’s bond yields reached a fresh 18-year high after their biggest quarterly jump in nearly four decades. The gap between French and German government bond yields reached 128.80 basis points, its highest since June 2012; Italy’s spread over German Bunds widened to 104.15 basis points, its highest since June 2025.
3. Markets price rate moves
Money markets priced the ECB deposit rate at 2.81% by December, implying one quarter-point hike and a 24% chance of a second. They also priced the rate at 3.42% by late 2027, compared with 2.50% currently.
