July Sell-Off Hits Global Government Bond Markets

Global government bond markets experienced a sell-off in July, with 10-year benchmark yields recording double-digit increases. The largest move was seen in Greece, where yields rose 40 basis points to end the month at 3.89%. European government bonds accounted for many of the month's largest shifts, with Italy's 10-year yield rising 36 basis points to 4%, followed by France (up 32 basis points to 3.98%), Ireland and Germany (both up 30 basis points to 3.34% and 3.16%, respectively).

At its July meeting, the European Central Bank (ECB) left rates unchanged, with some market participants looking ahead to the possibility of further rate hikes. The ECB's quarterly Survey of Professional Forecasters pointed to higher projected inflation and softer economic growth across some measures.

Roderick Joniaux, Head of European Government Bonds and Supranational Products at Tradeweb, noted that 'Markets repriced nominal yields upward in July amid an increase in oil prices, higher inflation expectations, less monetary tightening or even rate hikes, and an increase in sovereign supply.' He added that 'A great deal of uncertainty remains around geopolitical events and central bank moves. All eyes are on August and September as a gauge of future central bank policy sentiment.'