Euro zone bond yields rose on Thursday as oil prices climbed and stronger business data added to expectations of further European Central Bank tightening. Germany’s 10-year yield reached 3.575%, while France’s rose to 4.69%, its highest in over 18 years.
The euro zone bond selloff resumed on Thursday. Germany’s 10-year government bond yield rose 3 basis points to 3.575%, its highest in over 17 years. A rates strategist at Commerzbank said renewed oil price increases were weighing on markets.
Investors were pricing in 35 basis points of ECB tightening by year-end, implying one quarter-point rate hike and about a 40% chance of a second. Futures implied four quarter-point hikes over the next 12 months. Bank of America Global Research said it expected a quarter-point deposit rate increase in December, having previously expected rates to remain unchanged for the rest of the year.
France’s 10-year yield rose more than 3 basis points to 4.69%, its highest in over 18 years. The spread over German 10-year yields widened to more than 111 basis points, its widest since mid-2012. France was in focus ahead of its 2027 election year, with a substantial primary deficit and budget risks linked to its fragmented parliament.
