Euro zone yields rise to multi-year highs as bond selloff intensifies
TLT•Euro zone bond yields rose as oil prices climbed and stronger business data bolstered expectations for further ECB tightening. Germany’s 10-year yield reached 3.5798%, its highest in more than 17 years, while France’s 10-year yield hit 4.696%, an 18-year high.
1. Yields climb across Europe
A renewed selloff in euro zone bonds pushed yields to multi-year highs on Thursday. Germany’s 10-year government bond yield reached 3.5798%, its highest in more than 17 years, and was last up 3 basis points. Rates strategist Hauke Siemssen said the renewed rise in oil prices was the main driver.
2. Markets price ECB hikes
Stronger economic data also contributed to the bond selloff, with German business morale rising more than expected in September. Money market futures priced in around 35 basis points of ECB tightening by year-end, implying one quarter-point hike and about a 40% chance of a second. Bank of America Global Research said it expects a quarter-point ECB deposit-rate increase in December.
3. French yields reach high
France’s 10-year yield rose to 4.696%, its highest in more than 18 years. The spread between French and German 10-year yields widened to more than 111 basis points, its widest since mid-2012. The ECB said board member Isabel Schnabel will leave on January 3 to take a role at the International Monetary Fund.
