Eurozone government bond yields have reached new multi-month highs, influenced by persistent service inflation and a sell-off in UK gilts. The UK 10-year gilt yield rose by 4 basis points to 4.84%, following an earlier increase of 11.5 basis points.
Inflation in the euro area climbed to 2.4% last month, up from 2.2% in November, primarily driven by high energy costs and resilient service prices. A recent survey by the European Central Bank indicates rising inflation expectations among market participants.
Germany's 10-year yield also increased by 1.5 basis points to 2.54%, marking its highest level since mid-July. Analysts suggest that fluctuations in UK gilts are linked to fiscal policies introduced in the October 30 Budget, highlighting a global competition for bond demand as markets prepare for a January supply glut.