loading
loading
(Bloomberg) -- A selloff in European bonds extended after European Central Bank President Christine Lagarde flagged risks to inflation, adding to investors’ ongoing concerns about elevated energy prices. Germany’s 10-year yield rose six basis points to 3.50%, the highest since 2009. The two-year rate climbed as much as 14 basis points to 3.21%, the highest in almost three years. Traders boosted wagers on further ECB interest-rate hikes after Lagarde flagged risks to inflation in the euro area, saying the conflict in the Middle East and developments in Russia’s war against Ukraine “pushed the path of energy prices up further.” Swaps are now fully pricing three more quarter-point increases by the middle of next year and a more than 70% chance of a move next month. “Another hike before year-end is no longer a tail risk,” said Patrick Ernst, a macro investment strategist at JPMorgan Private Bank. “Policymakers made clear that an energy-led inflation risk is still very much in play.” The ECB said inflation is set to remain well above its 2% target for an “extended period” as conflict in the Middle East continues to fan price pressures. Lagarde also warned that higher energy costs are set to feed through gradually to core and food-price inflation. Bonds slumped across the globe this week as Brent oil spiked above $105 a barrel and European natural gas prices hit the highest since late 2022. In the US, 30-year yields reached levels last seen in 2007. “Energy, and natural gas in particular, has been the only game in town for euro rates since July,” said Kenneth Broux, a strategist at Societe Generale SA. Bund yields look high relative to longer-term inflation expectations, but any rally is likely to be short-lived unless energy prices settle down, he added. The selloff in European bonds took the additional yield on French 10-year bonds over their German counterparts to 91 basis points, the highest on an intraday basis since 2012. French borrowing costs have been under pressure in recent sessions, as investors become increasingly wary about the nation’s budget deficit and uncertain political outlook. UK bonds also fell, with two-year yields up 16 basis points at 4.86% and 30-year yields at 5.93%, the highest since 1998. Traders also upped bets on Bank of England interest-rate hikes to 110 basis points of tightening by the end of next year, from 89 basis points on Wednesday. Lagarde said the rise in bond yields is “not a euro specific issue” and added that the central bank is watching moves at the long-end of the curve closely. She pointed to multiple causes, including the rise in AI-debt issuance. “The market is right in thinking more hikes will be coming,” said Ed Hutchings, head of rates at Aviva Investors, adding that he still sees value being created in European bonds. “With two hikes already being delivered and more than a further two hikes priced, things may well have gone too far.” --With assistance from James Hirai and Naomi Tajitsu. (Updates market moves throughout.) More stories like this are available on bloomberg.com ©2026 Bloomberg L.P. Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
document fetched 2026-09-11 03:00 · canonical https://livemint.com/market/german-yield-hits-17-year-high-as-traders-up-ecb-hike-bets-11789072150224.html