Europe's Bond Market Selloff Intensifies Amid Soaring Gas Prices
The European government bond market is experiencing its worst selloff in years due to rising natural gas prices and geopolitical tensions. The benchmark TTF hub has seen natural gas prices climb above €75 per megawatt-hour, a level not seen since early 2023.
This surge has pushed bond yields across the board, with Germany's 10-year Bund yield reaching its highest point since 2011 at around 3.38-3.39%. UK 10-year gilts have also surged to around 5.1-5.29%, levels not seen since before the 2007-2008 global financial crisis.
The selloff is particularly severe for short-dated bonds, which are sensitive to shifts in central bank policy expectations. Earlier this year, markets were expecting rate cuts from the ECB, but now traders are pricing in rate hikes, with odds exceeding 60% for a March 2026 hike.