Euro zone bonds join global selloff, long-end yields at multi-year highs

Longer-dated euro zone bond yields hit multi-year highs on Tuesday, joining a global fixed-income selloff as fading hopes for a swift end to the war in Iran drove oil prices higher and fuelled inflation concerns. Long-standing worries about fiscal stability in countries such as France, Japan, the UK and the ‌United States also ⁠weighed ⁠on global bonds, even as recent soft U.S. data 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 4 basis points at 3.255%, 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 4.118%, its highest since November 2008, ​pushing the spread between German and French 10-year yields to 86 bps, ⁠its widest since ‌October 2025.

LONG-END WORRIES 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 have again reignited concerns about ⁠fiscal stability. The deteriorating geopolitical backdrop is also expected to drive higher ​military expenditure, while volatile weather in Europe is adding to the strain on ​public finances.

Concerns over the fiscal outlook tend to weigh more heavily on longer-dated bonds, where prices are more sensitive to shifts in government borrowing and debt sustainability expectations.

"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 2 bps to 3.7663%, its highest since July 2011.

Other heavily indebted countries, such as Japan and the U.S., were seeing similar moves. The U.S. 30-year ​yield rose to its ​highest in 19 years ⁠and Japan's 10-year yield rose to its highest in almost 30 years.

ECB TO HIKE?

Brent crude futures rose to their highest level in over three weeks on Tuesday as expectations of a quick end to the war appeared to fade. ​Rising energy prices have reignited worries about higher inflation, helping keep expectations for tighter policy from the European Central Bank.

Futures markets are almost fully pricing in a quarter-point rate hike at next month's policy meeting, while around 44 bps of tightening is priced in by the end of the year, implying an almost 80% chance of another.

Germany's two-year yield, which is sensitive to changes in policy expectations, was up 3 bps at 2.828%, its highest level since July 24.