Euro zone government bond yields hit their highest levels in more than a decade on Wednesday, as regional German data kept fears about inflation at the front of investors’ minds.
Germany’s 2-year government bond yield, which is highly sensitive to changes in interest rate expectations, rose to its highest since October 2008 at 3.209%, and was last up 8 basis points (bps) to 3.202%. Bond yields rise as prices fall, and vice versa.
The yield on Germany’s 10-year bond, seen as the benchmark bond for the single-currency area, was up 8 bps to 2.711%, its highest since July 2011.
Yields rose sharply on Tuesday after data showed inflation was higher than expected in France and Spain in February, adding to the pressure on the European Central Bank (ECB) to keep hiking interest rates.
On Wednesday, regional inflation data from Germany began to trickle through, with prices in North-Rhine Westphalia, the most populous region, rising 8.5% year-on-year in February, up from 8.3% in January.
More regional data at 10 a.m. local time (0900 GMT) will give a fuller sense of price pressures in the euro zone’s biggest economy.
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