ECB Interest Rate Hike Sends Public Debt Markets into Turmoil

The European Central Bank (ECB) raised interest rates by 25 basis points to 2.5% on September 16, which had an immediate impact on public debt markets.

In Spain, the yield on the ten-year bond rose to 3.963%, its highest level since 2023, while Germany's ten-year bond stood at 3.5%, returning to levels not seen since 2011.

The ECB maintained inflation forecasts at 3% for 2026, raised to 2.5% in 2027, and 2.1% in 2028, citing the ongoing Middle East crisis as a significant challenge for economic growth.

The public debt market's reaction is not limited to Europe, with global state bonds experiencing their highest yields since the 2008 financial crisis, according to Bloomberg Global Government Bond Index.