Eurozone government bonds extend weekly decline, German 2-year yield rises to 3.208%

Eurozone government bond prices fell on Friday, with the global bond market set to record its worst weekly performance since the outbreak of the Iran war, as soaring energy prices have forced central banks to act swiftly to combat inflation. On Thursday, the European Central Bank raised eurozone interest rates by 25 basis points as expected, while also raising its inflation forecast and lowering its growth projection. Later on Friday, U.S. CPI data may reinforce market expectations for a Federal Reserve rate hike next week. The Bank of Japan will also hold a meeting next week, and a rate hike is also widely anticipated. On Friday, the yield on Germany's two-year government bonds rose by 3 basis points to 3.208%, the highest since October 2023, marking an increase of nearly 23 basis points for the week—the largest weekly rise since the first week of the war in early March. This week, G7 two-year government bond yields rose by an average of nearly 25 basis points, the largest increase since the first week of the war, while 10-year yields climbed nearly 20 basis points, with France leading the pack with a 25 basis point jump. The yield on U.S. 10-year government bonds is nearing 5%.