Eurozone bond yields rose on Wednesday to their highest levels since the end of April as British inflation data fell less than expected. UK inflation fell to 8.7% from 10.1% in March, falling short of an expected drop to 8.2%.
Germany’s 10-year bond yield rose to 2.501%; its highest level since April 24. Italy’s 10-year bond yield increased by four basis points to 4.355%, rising to its highest level since March 9 when it stood at 4.376%. The gap between Germany’s and Italy’s 10-year bond yields rose to 186 bps.
Pooja Kumra, a European rates strategist at lender TD, observed that Wednesday’s bond yield increases were largely a reaction to the latest UK inflation data. “It’s a wake-up call for euro markets as well, that central banks are not done because inflation still needs to be tamed,” Kumra warned.
Aside from incoming UK inflation data, traders are also keeping an eye on the latest moves by the European Central Bank. Currently, they are betting on the ECB implementing another interest rate hike that will raise interest rates to 3.84%—the highest expected rate since April.