ECB Inflation Risks Spark ECB Hike Bets and German Bond Selloff

The European Central Bank (ECB) has flagged risks to inflation, citing elevated energy prices and conflicts in the Middle East. As a result, investors are increasing their bets on further ECB interest-rate hikes.

Germany's 10-year yield rose six basis points to 3.50%, its highest since 2009, while the two-year rate climbed as much as 14 basis points to 3.21%, the highest in almost three years.

Traders now fully price three more quarter-point increases by the middle of next year and a more than 70% chance of a move next month.