Volatility is the 'new norm' for government bonds as interest rate uncertainty sees yields whipsaw

Government bond yields moved higher as renewed uncertainty about inflation and the outlook for European interest rates prompted duration repricing. A rebound in oil prices and concern over the fragility of the U.S.-Iran ceasefire increase upside risks to inflation, which could sustain further pressure on yields and drive a risk-off response in rates-sensitive assets.

Analysis

Government bond yields moved higher as renewed uncertainty about inflation and the outlook for European interest rates prompted duration repricing. A rebound in oil prices and concern over the fragility of the U.S.-Iran ceasefire increase upside risks to inflation, which could sustain further pressure on yields and drive a risk-off response in rates-sensitive assets.