Euro zone bond selloff pauses as Germany 10-year yield eases 2 bps

Germany's 10-year yield falls 2 bps, hit 17-year high on Monday Money markets price almost four more quarter-point ECB hikes Oil and gas prices remain main driver (Updates for European morning trading) By Samuel Indyk LONDON, Sept 29 (Reuters) — A selloff in euro zone bonds paused on Tuesday, although yields remain close to their highest in years as robust growth and elevated energy costs are expected to push global interest rates higher. 624%. Bond yields move inversely to prices. 6526%.

Oil and gas prices remain the biggest driver of euro zone bonds by generating concerns that energy-driven inflation could force the European Central Bank to raise rates further. Oil prices are slightly lower on Tuesday, a day after US and Iranian officials spoke separately with mediators in a renewed effort to end seven months of war. Ecb To Take Measured Approach On Monday, ECB President Christine Lagarde said the central bank views a measured response as appropriate to keep inflation in check. She also flagged that bond market developments, namely rising long-term yields, could slow growth.

"It's interesting to see if this is something that is starting to bother the ECB a bit," said Jussi Hiljanen, rates strategist at SEB. " Money market traders are currently pricing in almost four more quarter-point rate hikes, on top of the two moves made over the summer. Futures imply about a 45% chance of a rate hike next month. When interest rates rise, newly issued bonds will offer higher returns, making existing bonds with lower coupons less attractive.

272%, after hitting a 3-year high the day before. Fiscal Worries Investor concerns about debt sustainability have also helped drive bonds lower, particularly in countries where the fiscal backdrop looks strained, such as France. France has gained particular focus as it heads towards a presidential election in 2027, with a substantial primary deficit and fragmented parliament. France's 10-year bond yield was little changed on Tuesday but close to its highest in 18 years reached the day before.

The gap between France and Germany's 10-year yields, a gauge of concern about France's fiscal and political outlook relative to Germany's, stood at 113 bps, its widest level since 2012. "The situation in France is very challenging into 2027," said SEB's Hiljanen. com)