LONDON: Ten-year bond yields in the euro area hovered near their highest levels in around two months on Tuesday, a day after a surge in US Treasury yields kept bond investors on edge over rising inflation and tighter monetary policy.
US 10-year Treasury yields jumped 12 basis points on Monday, while two-year yields surged to their highest levels since March 2020 when the coronavirus pandemic first sparked turmoil across world markets.
US and European bond yields were on steadier ground as London markets reopened after Monday's holiday, but yields held close to their highs.
Germany's 10-year Bund yield was a touch lower on the day at -0.14%, having briefly touched a new two-month high in early trade at around -0.12%.
"Bond markets haven't been able to catch a bid since the holiday season began and yesterday's sell-off in US Treasuries serves as a foretaste of what could follow in a year of elevated inflation and prospective monetary tightening," said Michael Leister, head of interest rates strategy at Commerzbank.
Italian 10-year yields also touched a two-month high, rising to almost 1.23% in early trade.
Yields were broadly higher across the Italian curve as investors also anticipated new supply in a month typically busy for European bond issuers.
Italy is expected to announce shortly the sale of a BTP bond with a maturity of between 15 and 30 years, two market sources said on Monday.
Germany, the euro area's benchmark bond issuer, is expected to sell two-year bonds later this session.
Data meanwhile showed France's European Union-harmonised consumer price index rose 3.4% in December from a year earlier.
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