Euro zone government bond yields extended a selloff on Wednesday, pushing benchmark German 10-year yields to a 15-year high of 3.275% amid mounting concerns over debt sustainability and rising oil prices.
France’s 10-year yield climbed above 4.13%, its highest since 2008, while Italy’s 10-year yield rose above 4.1%, nearing March peaks. Germany’s 30-year yield reached 3.787%, the highest since 2011, according to trade data. The broader tightening in euro zone borrowing costs reflected investor unease over persistent inflation, elevated public spending, and robust economic activity, with longer-dated bonds most exposed.
Money markets increased bets on further European Central Bank tightening this year, pricing in roughly 45 basis points of additional rate hikes, up from 40 bps on Friday. The ECB’s expected path contrasts with relative calm in U.S. Treasuries, where the 10-year yield held near 4.7%, limiting the global selloff’s scale.
Brent crude oil prices rose more than 1% to $92.38 a barrel, the highest since late July, as geopolitical tensions in the Strait of Hormuz added upward pressure. U.S. President Donald Trump stated on Tuesday that no negotiations were underway with Iran and asserted the waterway remained open, contradicting Tehran’s claims that it was closed. The standoff has fueled energy market volatility.
Germany conducted a debt auction on Wednesday, selling €3.8 billion of 10-year bonds, below the €6 billion analysts had forecast. Michael Weidner, co-head of global fixed income at Lazard Asset Management, noted that investors are increasingly focused on sovereign debt sustainability in developed markets, while thinner summer liquidity may be amplifying bond market moves. He added that unresolved geopolitical risks, particularly around Iran, continue to weigh on sentiment.
