Euro Zone Bond Yields Hit Multi-Week Highs Amid Global Economic Shifts

Euro zone bond yields have risen to highs not seen in weeks as global economic indicators suggest a slowdown in central bank rate cuts. Germany's and Italy's yields have increased, and Britain's new budget has affected UK yields. U.S. yields are also impacted by strong economic data.

Euro zone bond yields reached multi-week highs on Thursday, stemming from a variety of global economic developments signaling a deceleration in central bank rate reductions. Germany's 10-year bond yield, a euro zone standard, jumped 5 basis points to 2.425%, the highest level since late July. Meanwhile, its two-year bond yield climbed 3 basis points to 2.31%, marking the peak since early September.

Data released on Thursday revealed that German retail sales surpassed expectations in September. This bolstered the impact of data from Wednesday, which showed that Europe's largest economy unexpectedly expanded in the third quarter alongside an inflation rate that exceeded expectations for October. Anticipation surrounds the Europe-wide inflation figures set for release at 1000 GMT.

In Italy, the 10-year yield rose 7 basis points to 3.64%, a peak since early September, widening the spread between Italian and German yields to 126 basis points. Across the globe, the Bank of Japan held its ground on ultra-low interest rates but emphasized its commitment to raising borrowing costs if the economy maintains a moderate recovery pace. Meanwhile, in Britain, gilt yields soared, characterized by an increase in the premium investors demand to purchase UK debt over German bonds, reaching heights last seen in August 2023, triggered by reactions to Britain's new budget plans. In the United States, yields surged following robust economic data as market participants anticipated a prospective return to power by Donald Trump.

(With inputs from agencies.)