economy
‘All bets are off’: European borrowing costs hit 15-year highs as investors brace for rate hikes
Bonds issued by various European countries continued to sell off on Friday, deepening a rout that has been mostly continuous since the U.S.-Iran war began.
TL;DR
- European government bond yields have reached multi-decade highs, continuing a sell-off that began weeks ago.
- Germany's 10-year bund and France's 10-year OATs hit their highest levels since mid-2011.
- U.K. government borrowing costs also surged to their highest levels since the 2008 financial crisis.
- The sell-off is linked to the U.S.-Iran war, which is expected to disrupt energy supplies and increase inflation.
- European Central Bank chief Christine Lagarde indicated preparedness to raise interest rates even if inflation spikes are temporary.
- Market expectations are high for the ECB to hike interest rates, with over 90% probability priced in for a June hike.
- Spain's flash inflation data showed an annual rate of 3.3%, lower than expected but still contributing to concerns.
- Consumer confidence in Germany and the U.K. has been negatively impacted by rising inflation fears.
- Analysts suggest energy prices are the primary driver of movement in European bond markets.