Germanys Bund Hits 2Year High, Inflation Expectations Rise

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LONDON, May 19 Reuters Euro zone government bonds yields rose on Wednesday, with the benchmark German Bund yield rising to a twoyear high in early trading as investors increasingly priced in the possibility of the ECB slowing its bondbuying as the economy recovers.

Euro zone inflation accelerated as expected in April because of a sharp rise in the costs of energy and services, data showed. British consumer price inflation more than doubled in April.

Core government bond yields were up by around 3 basis points in early trading, while Italys 10year yield reached its highest since September 2020.

A key gauge of euro zone inflation expectations the fiveyear, fiveyear inflation forward rose to its highest since December 2018.

The moves follow a big selloff in euro area government bonds on Monday, driven by speculation that the ECB may slow its emergency bond buying as the economy recovers from the COVID19 pandemic.

At 1125 GMT, Germanys 10year bond yield was up 2 bps at 0.089. Italys 10year yield was up 3 bps at 1.123, having reached as high as 1.16 earlier in the session .

I actually think that most of the widening between German and Italian yields has to do with the backdrop of rising rates I think Italys more vulnerable to this rising rates environment because they just have so much debt to sell, said Antoine Bouvet, senior rates strategist at ING.

U.S. Treasuries were calmer, with the 10year yield up 2 bps and trading within the months ranges.

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