Yields on sovereign bonds edged up again on Monday, renewing a sell-off which took steam last week amid concerns over higher interest rates.
Yields on the 10-year US Treasury and 10-year gilt climbed around 0.1 per cent on Monday while the 10-year German Bund, which acts as a benchmark for European markets, climbed 0.04 per cent. Prices and yields move inversely.
Sovereign bonds suffered from a widespread sell-off last week, with yields rising across many developed economies. The sell-off meant that yields on US government debt rose to their highest levels since 2007.
Gilt yields also climbed sharply in the period, but remain below the peaks reached over the summer.
“The recent rise in yields has been mainly a result of the market waking up to the fact that rates are unlikely to be cut any time soon and has occurred despite the better-than-expected inflation data of late,” Rupert Thompson, chief economist at Kingswood, said.
A string of central banks, most prominently the US Federal Reserve, have suggested that interest rates would likely have to remain higher for longer. Some traders are now expecting the Fed will hike rates once more this year.
Borrowing costs, represented by yields, closely reflect market expectations for where interest rates are heading.
While markets are slowly adjusting to the fact that interest rates will be left higher for longer, there are still lingering concerns around the potential impact of rising oil prices on inflation.
Brent oil soared to around $95 a barrel in September on the back of Saudi Arabia and Russia extending production cuts, although it has eased slightly to just over $91.
“Concerns about inflation remained in the background as well, partly thanks to a fresh surge in oil prices over Q3,” analysts at Deutsche Bank said.