Government bond yields across the euro zone climbed across all tenors Thursday, extending a global sell-off triggered by unexpectedly robust purchasing managers' index data from Europe and the United States.
Germany's 10-year Bund yield rose to 3.549%, serving as the benchmark for the 20-nation bloc. The move followed Wednesday's session, when the Bund posted its largest single-day yield jump in more than two months. Germany's two-year Schatz yield advanced to 3.303%, reaching its highest level since September 2023 after recording its biggest one-day gain in nearly two weeks the prior session.
Flash PMI data released Thursday indicated business activity across the euro zone accelerated at its fastest pace in over three years, defying expectations of a stagflationary slowdown. The data strengthened the case for additional interest-rate increases by the European Central Bank.
Parallel U.S. survey data pointed to continued momentum in both services and manufacturing, leading money-market participants to quickly discount near-term rate-cut probabilities. U.S. futures markets were pricing in a 70 percent probability of a Federal Reserve rate increase in October.
In France, investors continued demanding an elevated risk premium to hold 10-year OATs due to a chaotic budget debate and worsening debt-to-GDP projections. The cost of insuring French sovereign debt via credit default swaps lingered near multi-year highs, contributing to a widening French-German yield spread.
