Euro yields cross 3.5% as ECB hikes rates to fight inflation amid oil price spike

European government bond yields surged this week, with Germany's 10-year Bund crossing 3.5% on Friday morning for the first time since April 2011. This movement followed a decisive action by the European Central Bank, which raised its deposit rate from 2.25% to 2.5% on Thursday and signaled that inflation might stay well above target for an extended period. The shift caused investors to anticipate further monetary tightening globally. Simultaneously, energy markets faced upward pressure as geopolitical tensions escalated in the Middle East. Yemen's Iran-backed Houthi rebels struck several Saudi energy targets and advanced toward the Bab el-Mandeb Strait, complicating global shipping routes. International benchmark Brent crude futures traded near $106 a barrel on Friday morning. European natural gas futures also reached their highest levels since 2022. Analysts at Deutsche Bank highlighted growing stagflation fears driven by these costs and mounting debt loads in wealthy nations. In the United States, the 10-year note yield nudged above 4.9% after a previous rise on Thursday. Across Asia Pacific, yields increased, with Australia's 10-year up 12 basis points and South Korea's rising 8 basis points.