German bond yields hit 2 1/2-year high after U.S inflation data
By Fanny Potkin and Abhinav Ramnarayan
LONDON, Feb 14 (Reuters) - German government bond yields hit
their highest level in over two years and European stocks fell
briefly on Wednesday after data showing U.S. inflation rose more
than expected in January fanned expectations for higher U.S.
interest rates this year.
Consumer prices in the world's largest economy overshot
forecasts and a measure of underlying inflation posted its
biggest gain in a year, strengthening expectations of a faster
pace of interest rate increases from the Federal Reserve.
"U.S. Treasury yields briefly hit their highest level in
over a year as the market grappled with the latest inflation
numbers, which came in much higher than consensus had
predicted," said Craig Inches, head of short rates and cash at
Royal London Asset Management.
"This sell-off fed through into global government bond
markets, with gilt and Bund yields also spiking."
The yield on Germany's 10-year government bond
, the benchmark for the region, reversed earlier
declines and rose to as high as 0.774 percent - its highest
level since September 2015, according to Tradeweb data. It later
inched down to 0.758 percent.
Most euro zone bond yields were up 1 to 3 bps on the day as
U.S. Treasury yields rose in the wake of the data.
The 5-year, 5-year breakeven forward, a European Central
Bank barometer of market long-term inflation expectations in the
euro zone, rose to a one-week high above 1.76 percent
An index of European stocks volatility jumped on the
release but fell back shortly afterwards and was still lower on
the day. The S&P 500 volatility index briefly turned
positive, then moved back down and was last trading at 24.67.
European stocks fell briefly after the data before
moving back into positive territory. The pan-European index was
last up 0.5 percent. Bank stocks reduced their gains to
trade up just 0.1 percent on the day.
Elsewhere, Greece's five-year bond yield rose 10
bps to as much as 3.879 percent, its highest since early
December. Ten-year yields rose to a two-month high
of 4.5 percent.
Portugal's bond market outperformed, with 10-year yields
trading at 1.911 percent, down 6.4 bps on the day
The country sold 1.25 billion euros of five-year and 10-year
bonds in an auction earlier in Wednesday after data showed its
economy grew at its fastest pace in 17 years.
Southern European government bonds were in demand earlier on
Wednesday, outpacing better-rated peers as data showed growth in
the bloc was the highest in a decade in 2017
(Additional reporting by Helen Reid & Dhara Ranasinghe, editing
by Mark Heinrich)
First Published: 2018-02-14 10:57:46
Updated 2018-02-14 18:50:38
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