After the ECB rate hike, European bond yields surged to multi-year highs, and the France-Germany yield spread broke 90 basis points.

⑴ Eurozone government bond yields reached multi-year highs on Thursday, with the German 10-year government bond yield rising to around 3.48%, the highest since 2011.⑵ The French 30-year government bond yield climbed to its highest level since the end of 2003, surpassing 5.1%.⑶ The spread between French and German 10-year government bond yields rose above 90 basis points, marking its highest level since 2012.⑷ Previously, the European Central Bank raised rates for the second time this year and stated that inflation risks remain tilted to the upside. Its decision and statement intensified pressure on the government bond market, and traders increased their bets on further hikes.⑸ Traders expect about 60 basis points of additional rate hikes by the April 2027 meeting, higher than the approximately 51 basis points expected before the statement was released.⑹ Institutional economists indicated that more important than the action itself is the European Central Bank’s use of this meeting to acknowledge that the economy is stronger than expected a few months ago, and the inflation outlook is more persistent.⑺ The economist pointed out that Thursday’s decision shows the European Central Bank Governing Council is increasingly unconvinced that 2.5% will necessarily be the endpoint of this cycle.⑻ Further attention will focus on Lagarde's Q&A, the transmission of energy prices and core inflation, and whether the Franco-German yield spread continues to approach 100 basis points. These factors will determine the persistence of selling pressure in the European bond market.