Lagarde's Inflation Warning Sparks Bond Market Selloff

Christine Lagarde's warning about inflation has sparked a fresh wave of concern in European bond markets. The ECB president said that price risks linked to the Middle East conflict and Russia's war against Ukraine have pushed energy prices up further.

The resulting market reaction saw Germany's 10-year yield add six basis points to reach 3.50%, its highest level since 2009. Meanwhile, the US 30-year Treasury yields touched highs last seen in 2007.

Lagarde emphasized that rising bond yields are not a euro-specific issue and cited several drivers, including a rise in AI-debt issuance. She also noted that elevated energy costs will likely pass through into core and food inflation over time.