Global Market: Eurozone bond yields rise as oil prices rebound above $100

Eurozone government bond yields rose on Tuesday, partly reversing the sharp declines seen in the previous session, as oil prices recovered after falling below $100 a barrel and renewed Middle East tensions heightened concerns over inflation, Reuters reported.

Germany's benchmark 10-year bond yield rose 3 basis points to 3.481%. It had dropped 7 basis points on Monday to its lowest level since September 10.

Oil prices moved higher as tensions in the Middle East remained elevated. Houthi fighters have been advancing to seize more territory held by Saudi Arabia in Yemen, adding to concerns over energy supplies from the region.


Read more: Global Market: Ligent Technologies jumps 19% in Hong Kong listing debut

Brent crude futures were last up nearly 2% at around $102 a barrel. The global benchmark had fallen to about $99 on Monday, its lowest level in almost two weeks, as investors took some encouragement from prospects for diplomatic discussions over the Iran war at a United Nations meeting this week. Reports of a partial recovery in Saudi oil shipments had also eased some supply concerns.

The decline in oil prices on Monday helped European bond markets recover after a recent selloff. Eurozone economies are particularly sensitive to energy costs because of their reliance on imported fuel.

Italian 10-year government bond yields rose 4 basis points to 4.376% on Tuesday after falling 10 basis points in the previous session. French 10-year yields also climbed 4 basis points to 4.509%, after dropping 10 basis points on Monday.

Read more: Global Market: KOSPI surges as Samsung, SK Hynix gain on tech rally

Eurozone bond yields have climbed to multi-year and, in some cases, multi-decade highs in recent weeks, tracking moves in US, British and Japanese government debt markets. The rise has been driven by expectations that the Middle East energy shock could keep inflation elevated, while resilient economic growth has encouraged traders to increase bets on higher interest rates.

Reuters also noted that investors have been concerned about elevated government debt levels and the large volume of borrowing by companies seeking to finance artificial intelligence-related investments.

France has faced particular scrutiny as the government attempts to reduce a budget deficit of more than 5% of gross domestic product ahead of a divisive election next year.

The spread between French and German 10-year bond yields widened by 1 basis point to 103 basis points on Tuesday. The spread, which is closely watched as an indicator of the additional risk premium investors demand to hold French debt, reached 105 basis points on Friday, its highest level since 2012, before narrowing by 3 basis points on Monday, Reuters reported.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)