Euro zone bond yields rose on Thursday, tracking overnight moves in U.S. Treasuries as the tussle between inflation and recession fears continued to grip markets.
A deteriorating inflation situation and concern about lost faith in U.S. Federal Reserve's power to make it better prompted U.S. central bank officials to rally around an outsized interest rate increase and firm restatement of intent to get prices under control, the minutes of the bank's June meeting where it hikes rates by 75 basis points showed on Wednesday.
"In Europe, the bond market has not fully followed the move from U.S. Hence, we expect that European yields/rates will catch up fairly fast this morning," he added. The two-year yield, sensitive to rates expectations, was up 7 bps to 0.45%, having dropped as low as 0.27%. "Markets should treat this as old news and remain focused on gas supply fears and recession risk," said Hauke Siemssen, rates strategist at Commerzbank.
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