Global bonds tumble as flaring inflation rattles investors
Global bond markets sold off sharply after inflation data came in higher than expected. Investors are repricing central bank rate-cut timing, with German, US and UK yields all moving visibly higher.
Successive upside surprises in headline inflation across Europe, the United States and the United Kingdom triggered a wave of selling in global fixed income. The US 10-year Treasury yield reached 4.68%, the German Bund rose to 2.82% and the UK Gilt climbed to 4.55%.
According to Reuters, investors have cut the probability of a June rate cut from the European Central Bank from 60% to 35%. Expectations for Federal Reserve cuts through year-end have been trimmed from 75 to 50 basis points. Analysts at Citi and JPMorgan flag sticky energy and food prices, dollar funding costs and Middle East shipping disruptions.
In equities, defensive sectors held up better while technology and real estate names closed under pressure. Investor attention now turns to next week's US producer price index, Germany's ZEW survey and UK inflation data.
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