Euro Zone Yields Climb as Traders React to Fed Decision

The Euro zone bond yields rose on Thursday after traders reacted to the jump in U.S. market rates following the Federal Reserve's decision to hold interest rates. Longer-dated bond yields, which reflect concerns about inflation and growth, rose the most as the 30-year U.S. Treasury yield climbed to a 19-year high overnight.

Analysts said the rise in long bond yields showed traders are sceptical about the Fed's commitment to reducing price pressures, as new Chair Kevin Warsh again refused to offer any clues about future moves. Germany's 30-year bond yield rose 3 basis points to 3.14%, but the moves in Europe were more muted than those in the U.S., reflecting expectations that the European Central Bank will raise rates again this year to tame inflation.

A rise in oil prices was also adding to the upward pressure on bond yields as traders factored in the possibility of stronger inflation. Brent crude was up 0.4% at $91.10 a barrel. Euro zone bond yields also ticked up slightly following better than expected growth data for the bloc, which showed the economy grew 0.4% in the second quarter.

However, shorter-dated European bond yields slipped, causing yield curves to steepen. This reflected a fall in 2-year U.S. Treasury yields as traders reduced their bets on immediate Fed rate hikes.