European Bond Market: Germany's 10-Year Government Bond Yield Posts Largest Increase in a Year

The yield on Germany’s 10-year government bonds has seen its largest increase since the government announced expanded spending in March 2025. The bond decline occurred amid escalating tensions in the Middle East, with rising oil prices and inflation expectations.

Traders have increased their bets on interest rate hikes by the European Central Bank, expecting a hike of 82 basis points this year, up from the 72 basis points expected on Wednesday; the likelihood of a rate hike at next month’s policy meeting has not been fully accounted for, with interest rate swaps indicating a 70% probability of a 25 basis point hike.

Due to weakened risk appetite, the Italy-Germany bond spread widened by 7 basis points to 95 basis points.

UK government bonds also fell sharply, completely reversing Wednesday’s gains, as traders raised their bets on rate hikes by the Bank of England, expecting an increase of 76 basis points this year, up from the previous 62 basis points.

Market:

German bond yields rose by 12 basis points to 3.07%;

German government bond futures fell by 102 points to 124.96;

Italy’s 10-year government bond yield rose by 18 basis points to 4.02%;

The Italy-Germany bond spread widened by 7 basis points to 95 basis points;

France’s 10-year government bond yield rose by 15 basis points to 3.80%;

The UK 10-year government bond yield rose by 13 basis points to 4.97%.

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Editor: Ding Wenwu