Euro zone bond yields rise as German inflation flares; UK gilts flag

Euro zone bond yields rise as German inflation flares; UK gilts flag
# 29 September 2022 19:23 (UTC +04:00)

Euro zone government bond yields rose on Thursday, unwinding most of the previous day's gains, after German inflation data reignited investor concerns over yet more interest-rates rises, APA reports citing Reuters.

Meanwhile, UK bond holders resumed their selling of gilts after the Bank of England (BoE) stepped in on Wednesday to stabilise the market in light of a surge in yields.

Euro area yields fell sharply, echoing the strength in the gilt market, after the BoE's decision to launch of an emergency bond-buying programme gave fixed income investors some relief from what has been an otherwise relentless drop in prices this year.

Analysts were cautious about the BoE measures, arguing that to restore markets’ confidence, the British Treasury needs to announce a credible plan to get debt under control.

Germany's 10-year government bond yield , which serves as a benchmark for the euro zone, rose 5 basis points (bps) to 2.20%. It hit its highest since December 2011 at 2.35% on Wednesday and is on track for a rise of 87 bps in the three months to September. This would be its biggest quarterly rise since early 1990, according to Refinitiv data.

The UK 10-year gilts were last up 12 bps at 4.13%, after having dropped almost 50 bps the day before.

"Markets calmed down after the BoE stepped in. However, the BoE move, without a change in political direction, might not be a turning point on its own," Chris Attfield, European rates strategist at HSBC, said.

More immediately, data on Thursday showed German inflation was at its highest in over a quarter of a century in September, driven by soaring energy prices, even before the impact of the global power crisis fully hits during the winter months.

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