European Bond Selloff Deepens on Energy Price Fears

The European bond selloff has deepened as European Central Bank President Christine Lagarde flagged risks to inflation, adding to investors' ongoing concerns about elevated energy prices.

Germany's two-year yield rose by 12 basis points to 3.19%, the highest in almost three years, as traders increased bets on further interest-rate hikes in the euro area.

Swaps now fully price three more quarter-point increases by the middle of next year, with a more-than-50% chance of a move next month.

Lagarde noted that the conflict in the Middle East and developments in Russia's war against Ukraine have pushed energy prices up further, adding to inflation risks.