European government bond yields continued their steady climb, approaching wartime peaks, as US-Iran negotiations concluded another day without substantial progress. The yield curve experienced a bear flattening, with two-year government bond yields in Germany, France, and Italy each rising by 7 basis points. One-year consumer inflation expectations in the eurozone reached 4%, significantly surpassing forecasts, prompting markets to increase bets on interest rate hikes by the European Central Bank. Swap contracts indicate an expected 71 basis points of tightening from the ECB by year-end; markets still assign a 10% probability of a rate increase at Thursday's policy decision. UK government bond yields also advanced, though their gains were more modest compared to their European counterparts.
Market data: - Germany's 10-year bond yield rose 3 basis points to 3.06%; - German bond futures fell 22.00 points to 125.13%; - Italy's 10-year bond yield increased 4 basis points to 3.87%; - The Italy-Germany yield spread widened by 1 basis point to 81 basis points; - France's 10-year bond yield climbed 3 basis points to 3.71%; - The UK 10-year gilt yield rose 3 basis points to 5.00%.
Comments