Germany’s 10-year Bund yield stabilized above the 3.6% mark, close to its highest level since June 2009, as investors weighed ECB President Christine Lagarde’s comments against flash inflation data and elevated oil prices. Lagarde said the recent inflation surge has yet to generate significant second-round effects across the euro area, suggesting a measured policy response remains appropriate. With eurozone inflation already above 3% and potentially nearing 4% by year-end, markets are pricing in up to four additional rate hikes over the next year, following two increases over the summer. Economists broadly expect the ECB to hold rates at its October 29 meeting and resume tightening in December, when new economic projections are due. Meanwhile, Spain’s harmonized inflation rate rose to 5% in September, its highest in three years and well above the ECB’s 2% target. Elsewhere, Brent crude remained elevated amid stalled negotiations over reopening the Strait of Hormuz.
Yields at new highs as bonds head for sharpest selloff in years Anthropic targets $2 trillion valuation in IPO, The seven-month-old conflict in the Middle East has been a key reason for investors repricing inflation and interest rate expectations, while soaring government debt competing with strong bond issuance by global AI companies has also driven yields higher. September is set to mark one of the heaviest bond selloffs in heavily indebted European economies and the US. Yields on French 10-year bonds were pinned at their 2008 high of 4.7619% and were set for their biggest monthly rise since 2022, while those on US 10-year notes were hovering near their 19-year high of 5.27% and were on track for their biggest monthly jump since 2024. Sovereign yields are an anchor for global markets, a reference price for investing in riskier stocks and a benchmark for mortgages and corporate borrowing. Higher rates pile pressure on government, corporate and household budgets. "Investors continue to expect that such restrictive financial conditions will eventually take their toll, but employment, consumer spending, and capital expenditures related to artificial intelligence remain solid," John Plassard, head of investment strategy at Switzerland-based Cité Gestion, said. "The real question, therefore, is not whether 5% is comfortable, but whether the US economy has become less sensitive to interest rates than it was before. If this resilience persists, the Fed will be able to keep rates high for longer without immediately triggering a recession." AI was in the spotlight after Tech stocks helped Europe's STOXX 600 rise 0.3%, while Nasdaq and S&P 500 futures on Wall Street were steady after a weak Monday. MSCI's global equities index was at a more than one-week low, while Brent crude futures rose 1% to $106 a barrel, even as US and Iranian officials made renewed efforts to end the conflict after President Donald Trump rejected a Tehran-backed proposal last week. Dollar Stands Tall Higher US yields and uncertainties over the timeline of the Middle East conflict kept the dollar afloat versus the euro at $1.1347 and the Japanese yen at 157.34 per dollar. The dollar index that measures the US currency against a basket of six other peers was poised for its first monthly gain since June. US inflation and employment data later this week will be key dr
6% mark, close to its highest level since June 2009, as investors weighed ECB President Christine Lagarde’s comments against flash inflation data and elevated oil prices. Lagarde said the recent inflation surge has yet to generate significant second-round effects across the euro area, suggesting a measured policy response remains appropriate. With eurozone inflation already above 3% and potentially nearing 4% by year-end, markets are pricing in up to four additional rate hikes over the next year, following two increases over the summer.
Economists broadly expect the ECB to hold rates at its October 29 meeting and resume tightening in December, when new economic projections are due. Meanwhile, Spain’s harmonized inflation rate rose to 5% in September, its highest in three years and well above the ECB’s 2% target. Elsewhere, Brent crude remained elevated amid stalled negotiations over reopening the Strait of Hormuz.