LONDON: Germany's benchmark 10-year Bund yield rose further into positive territory on Monday, hitting its highest level since June's Brexit result as a shake-out in world bond markets made itself felt across the region.
Portugal's 10-year bond yield jumped 10 basis points to a two-month high at 3.27 percent, while Italian and Spanish yields rose to multi-week highs as European shares fell by their most in nearly three months.
A specific trigger for the sudden spike in bond yields that took off at the end of last week is unclear. The possibility of a U.S. rate hike this month, news that the Bank of Japan is studying ways to steepen the bond yield curve, and the lack of action at last week's European Central Bank are all cited as possible triggers.
"There is an injection of uncertainty over whether monetary policy makers are at a turning point," said Mizuho rates strategist Pater Chatwell.
What is clear, say analysts, is that bond markets have entered a new period of volatility that has revived memories of a sharp sell-off in German bonds that took place between April and June last year.
German Bund yields have jumped more than 15 bps in the last three sessions, ending a period of trading in negative territory that followed Britain's June 23 vote to leave the European Union.
The 10-year Bund yield climbed 3 bps on Monday to 0.049 percent.
Across the euro zone bond yields were 3-10 bps higher and outside the bloc, fixed income markets were also in the doldrums.
U.S. 10-year Treasury yields hovered at their highest levels in more than two months, while the Japanese yield curve steepened sharply on speculation that the Bank of Japan will change its policy.
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