The German 10-year government bond yield has spiked to its highest level since November 2014 following Mario Draghi’s warning of further volatility ahead.
In his monthly press conference, the European Central Bank (ECB) president said investors should be prepared for “periods of high volatility” in European government bonds.
He also raised the ECB’s expectations for 2015 inflation to 0.3 per cent, following data released yesterday showing inflation had risen to 0.3 per cent in May from 0 per cent in April, and warned “inflation rates are expected to pick up further during 2016 and 2017”.
Investors immediately reacted negatively to Mr Draghi’s comments, selling off European bonds and causing the yield on a 10-year German bond to rise 10 basis points to 0.83 per cent, meaning prices will have fallen.
The yield had already risen steadily throughout this week after closing at 0.5 per cent last week.
The move was mirrored in other European government bonds, as the yield on Italy’s 10-year debt had risen from 2.02 per cent to 2.14 per cent at the time of writing.
