Eurozone bond yields rose markedly after European markets reopened after Easter. Market participants also continue to analyze the latest data on the US labor market, which increased the likelihood of a further increase in the Fed's interest rate.
German 10-year bond yields rose by 5.6 basis points to 2.237%, while the yield on 2-year bonds jumped by 9.1 basis points to 2.638%. The yield on France's 10-year bonds rose by 5.5 basis points to 2.756%, while the yield on Italy's 10-year bonds rose by 6.5 basis points to 4.089%. The closely watched gap between Italian and German 10-year yields is now 185 basis points. Yields are still well below levels at the start of March, when the German 10-year stood at a more than 11-year high of 2.77%.
Experts note that today's rise in bond yields is a reaction to the sale of US Treasury bonds over the long Easter weekend, especially after a strong report on the US labor market.
While European markets were closed over the Easter weekend, traders became more confident that the Fed will continue tightening monetary policy at its May meeting, which will help increase US bond yields. Traders now see a 67% chance of the Fed raising the rate by 0.25% in May, which will increase pressure on the European Central Bank to continue raising the interest rate as well. Market pricing assumes that the ECB will raise the rate by 0.25% in May with a probability of 80%, and with a probability of 20% - by 0.5%.