German 10-year Bund yield hits 15-year high amid inflation fears

Germany's benchmark 10-year Bund yield rose to 3.286% on Friday, its highest level since March 2011, as persistent inflation data and hawkish central bank signals drove a broad selloff across European government bonds.barchart+1

The move came as inflation readings from France and Spain showed renewed price pressures in August, reinforcing market expectations that the European Central Bank will raise interest rates at its September 10 meeting. Markets are now pricing the ECB deposit rate at around 2.80% by March next year and approximately 2.90% by late 2027, with a roughly 60% probability of rates eventually reaching 3%.economictimes+1

ECB and Fed Signal Further Tightening

Recent ECB minutes suggested officials view another rate increase as likely necessary, with Reuters reporting that policymakers are prepared to hike in September to contain fallout from elevated energy prices, though they remain reluctant to signal further tightening beyond that.tradingview

The hawkish tone extended across the Atlantic. At the Jackson Hole Economic Policy Symposium, Boston Fed President Susan Collins said she is "open to supporting an increase if I see conditions as not providing that evidence of continued disinflation that I'm looking for." Fed Chair Kevin Warsh, delivering his first Jackson Hole keynote, warned that inflation has not meaningfully slowed and that policymakers still have "work to do."marketscreener+1

Global Bond Selloff Widens

The pressure was not confined to German bonds. French and German 30-year yields each reached fresh multi-year highs on Friday, with Germany's 30-year yield climbing to 3.79% and France's to 4.93%—a 17-year high. The 10-year UK gilt yield rose above 5%, reaching 5.048%.reuters+1

The spread between Italian and German 10-year bonds stood at 82 basis points, while France's spread over Germany widened to 85.5 basis points, its highest since November 2024, reflecting investor concern over Paris's difficult fiscal outlook.economictimes

In the United States, the 10-year Treasury yield edged up to 4.682%, while futures markets priced in about a one-in-three chance of a Fed rate hike at the September 15-16 meeting.barchart+1

Fiscal Concerns Add to Pressure

Analysts warned that structural factors continue to weigh on long-dated bonds globally. U.S. government debt now stands at $40 trillion, and a recent Treasury buyback expansion has done little to ease concerns. "A buyback does not retire debt and so does not solve the structural problems that have been driving yields up," said Natalia Lojevsky, managing director at CIFC Asset Management.marketscreener

In Europe, Société Générale strategists noted that negotiations on 2027 budgets could refocus investor attention on fiscal challenges and political uncertainty after the summer recess.marketscreener