LONDON – Euro zone bond yields hit multi-year highs on Aug 18, joining a global fixed-income sell-off, as fading hopes for a swift end to the war in Iran drove oil prices higher and fuelled inflation concerns.
Longstanding concerns about fiscal stability in countries such as France, Japan, Britain and the US also weighed on global bonds, even as recent soft US data have prompted markets to trim their expectations for rate hikes from the Federal Reserve.
Germany’s 10-year yield, the benchmark for the euro zone, was last up 3 basis points (bps) at 3.2478 per cent, its highest level since May 2011. Bond yields move inversely with prices.
Similar moves were seen in France, and the other more-indebted countries of the euro zone like Spain and Italy, where yields rose even more.
France’s 10-year bond yield rose to 4.0954 per cent, its highest since November 2008. That pushed the spread between German and French 10-year yields to 86bps, its widest since October 2025.
Long-end worries
Concerns over the fiscal outlook tend to weigh more heavily on longer-dated bonds, where prices are more sensitive to shifts in long-term borrowing, inflation and debt sustainability expectations.
Those concerns have been amplified by fears that a prolonged Iran war could lead governments to ramp up spending to cushion the economic impact of energy supply disruptions from the Middle East, while the deteriorating geopolitical backdrop is also driving higher military expenditure.
“Markets are clearly demanding more compensation for locking up capital for very long periods,” said Kjersti Haugland, chief economist at DNB Carnegie.
“Future financing needs, and therefore also the supply of government bonds, are substantial, reflecting ageing, rearmament and a greater need for supply security in a world marked by rising geopolitical conflict and unrest.”
Germany’s 30-year yield rose 2bps to 3.7663 per cent, its highest since July 2011. REUTERS
