Traders are pricing in a roughly 70 per cent chance of another quarter point rate increase when the European Central Bank next meets in September.
Benchmark 10-year bond yields across the euro area rose on Thursday, with further signs that major central banks will keep interest rates higher for longer, weighing on sentiment., released late on Wednesday, showed rate-setters were divided over the need for more rate hikes, pushing Treasury yields higher and setting the tone for European bond markets.
Italy’s 10-year bond yield rose to 4.41 per cent and was last up 5 bps on the day. The closely watched gap over 10-year German Bund yields briefly hit 175 bps - the widest in just over a month.“We stay cautious for now,” said Commerzbank rates strategist Hauke Siemssen, referring to the outlook for eurozone bonds.
And even a sell-off in global stock markets, driven in part by a deepening property crisis in China, failed to shore up safe-haven government bonds. “As long as markets there remain relatively contained, the bigger concern is inflation and the fact that the US economy has not shown much sign of deceleration,” said Derek Halpenny, head of research for global markets EMEA at MUFG.
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