Bond Yields Surge Amid Inflation Concerns in Trump-Era Europe

European government bond yields increased, mirroring U.S. Treasuries, due to anticipated long-term inflation under Trump's presidency. A rise in U.S. consumer prices bolstered expectations of rate cuts by the ECB, while German and Italian bond yields also climbed. Tariff threats add to economic worries.

European government bond yields have climbed, tracing a similar path to U.S. Treasuries, as investors brace for heightened inflation expectations amid Donald Trump's presidency. Benchmark 10-year yields have reached 4.483%, a notable four-and-a-half-month high.

Germany's 10-year bond yield increased by 2 basis points to hit 2.41%, while Italy's 10-year yield, representing the eurozone's periphery, edged up 1 basis point to 3.64%. The correlation between European and U.S. rates is expected to remain robust amid limited macro data in the eurozone.

The threat of new U.S. tariffs under Trump's administration exacerbates concerns over the euro area's slow economic recovery, reinforcing arguments for further rate cuts by the European Central Bank. Expectations are strong for a December rate cut, with some market predictions placing it at 50 bps.

(With inputs from agencies.)