Euro zone government bond yields surged to multi-year peaks on Tuesday, driven by a sharp rise in oil prices and mounting inflation concerns. Germany’s 10-year yield increased 4 basis points to 3.255%, the highest level since May 2011, while France’s 10-year bond yield climbed to 4.118%, its highest since November 2008.
The spread between German and French 10-year yields widened to 86 basis points, the widest gap since October 2025, reflecting growing fiscal divergence within the bloc. Countries with higher debt levels, such as Spain and Italy, saw even larger increases in borrowing costs.
The selloff in euro zone bonds was part of a broader global trend, fueled by rising oil prices amid diminishing hopes for a swift resolution to the conflict in Iran. The surge in energy costs heightened inflation expectations, pressuring long-dated yields across major markets.
Additional pressure on global bonds stemmed from fiscal stability concerns in France, Japan, the UK, and the United States. In the U.S., markets reduced expectations for Federal Reserve rate hikes following recent weak economic data, contributing to the broader tightening in financial conditions.
