Euro Bond Yields Near Multi-Year Highs Ahead of ECB Rate Decision
The Euro zone sovereign bond yields have been hovering near multi-year high watermarks, as investors prepare for tighter monetary policy ahead of the European Central Bank's (ECB) rate decision on Thursday. The benchmark yield is trading firmly near 3.382%, holding close to its highest level since August 2011.
The surge in energy prices is driving inflation fears across the single-currency bloc, with traders betting that central bankers will keep policy restrictive well into late autumn. Energy benchmarks have crossed triple digits, threatening to reignite broad-based headline inflation and squeeze corporate margins.
The ECB's decision on Thursday is expected to be a 25-basis-point interest rate increase from President Christine Lagarde and the Governing Council. Money markets have almost fully priced in this outcome, with traders looking ahead to U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) metrics due later in the week.