Eurozone government bond yields climbed on Thursday, reversing a two-week low as comments from European Central Bank policymakers underscored the need for tighter monetary policy to curb inflation.
Germany’s benchmark 10-year Bund yield increased to 3.226%, snapping a brief dip below 3.20% earlier in the session. The policy-sensitive two-year Schatz yield rose to 2.810%, reflecting a broader shift in European sovereign debt markets. The moves followed remarks by ECB Executive Board member Isabel Schnabel, who warned in a Bloomberg interview that borrowing costs must rise further to ensure inflation returns to the central bank’s 2% medium-term target.
U.S. Treasury yields also edged higher, with the benchmark 10-year yield climbing to 4.666% and the two-year yield reaching 4.230%. The 30-year yield inched up to 5.186%. The increases came after yields had fallen to multi-week lows earlier in the week, partly due to stabilizing energy prices and reduced expectations of imminent Federal Reserve policy easing.
The rise in yields followed a brief rally driven by Treasury Secretary Scott Bessent’s announcement of expanded debt buyback operations, which were partially financed through the Treasury General Account. Investors had been assessing whether the U.S. central bank would maintain its restrictive stance or signal potential policy easing in the coming months.
In Germany, consumer sentiment showed unexpected resilience, with the GfK/NIM index improving to -26.6 points ahead of September. The data suggests a degree of economic stability in Europe’s largest economy despite ongoing inflation pressures. The ECB’s medium-term inflation target remains a key focus for policymakers as they weigh further policy adjustments.
