Frankfurt, We Have a Problem. Bond Yields Are Rising

It’s less than a year since European Central Bank President Christine Lagarde was forced to backtrack after her comment that “we’re not here to close spreads” roiled bond markets. As rising U.S. Treasury yields drive European borrowing costs higher, she now faces the prospect of having to intervene to cap outright levels.

With commodity prices near an eight-year high, governments increasing their fiscal support for local economies and vaccine successes stoking optimism about an end to lockdowns, 10-year U.S. yields have climbed to their highest in a year. Correspondingly, the 30-year German yield has turned positive, rising to 0.2% from -0.2% in three short months.