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Euro Zone Bonds Rise Following Central Bank Rate Hikes

Euro zone bond yields edged higher on Wednesday after several central banks across the region implemented interest rate hikes. Investors have since shifted focus to the Bank of England’s expected interest rate hike later in the day.

The Swiss National Bank raised interest rates from 1.5% to 1.75% on Thursday, implying that it may extend its rate hikes going forward. A half-hour later, Norway’s central bank followed with a 50 basis point hike to 3.75%.

Following the recent central bank decisions, Germany’s 10-year bond yield rose by 1 basis point to 2.437%. The country’s two-year bond yield rose by two basis points to 3.202%. Italy’s 10-year bond yield also rose by a basis point to 4.066%.

Bond yields remained relatively unchanged following the testimony of Federal Reserve Chair Jerome Powell in front of Congress on Wednesday. Powell stated during his address that it appears likely that the central bank will implement two more 25 basis point rate hikes before the end of the year. Since March 2022, the Federal Reserve has increased interest rates by 500 basis points to a range of 5% to 5.25%.

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