European Bond Yields Hit Multi-Year Highs Amid Global Sell-Off

German 10-year Bund yields climbed to 3.5% on Friday morning. This level marks a multi-year high for European government borrowing costs. The rise follows a broader global sell-off in fixed-income assets.

Investors are reacting to persistent inflation risks and geopolitical instability. The European Central Bank raised its deposit rate to 2.5% on Thursday. This move signaled a tougher stance on monetary policy than many had expected.

Geopolitical Tensions Drive Energy Costs

Conflict in the Middle East has disrupted energy supply chains. Houthi rebels attacked Saudi energy targets and advanced toward the Bab el-Mandeb Strait. The Strait of Hormuz remains effectively closed due to ongoing fighting.

Brent crude traded above $100 a barrel in recent days. The front-month contract was near $106 on Friday. Higher energy prices keep inflation elevated, complicating central bank decisions.

ECB Hike Reshapes Yield Curves

The ECB lifted rates from 2.25% to 2.5% on Thursday. Officials warned that inflation could stay above target for an extended period. This hawkish tone pushed market expectations for further tightening higher.

French 10-year yields stood at approximately 4.44%. Italian 10-year yields reached about 4.37%. Spanish 10-year yields were around 3.96%. These figures reflect significant pressure across the Eurozone.

Global Treasury Markets Face Pressure

US Treasury yields also reached multi-year highs. The 30-year yield climbed above 5.38% on Friday. This was the highest level since 2007. The 10-year yield approached 5%.

UK 10-year gilt yields eased towards 5.35% on Friday. They had hit 5.378% on Thursday, a high not seen since 2007. Long-term UK gilts also reached their highest levels since 1998. GN auto markets/bonds: bond yields data confirms this trend.