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Government bond markets remained under pressure on Tuesday as traders anticipated a fresh round of US inflation data and braced for central banks to tighten monetary policy.
The yield on the 10-year Treasury note, which serves as a benchmark for borrowing costs around the world, rose 0.04 percentage points to 1.95% as the price of debt fell.
German, Italian and Spanish yields climbed, in anticipation of the European Central Bank following the US Federal Reserve to reduce its purchases of government bonds that have suppressed borrowing costs since the coronavirus swept through Western countries it two years ago.
Equity markets traded cautiously, with the regional Stoxx 600 index opening 0.2% higher. A FTSE stock index in Italy, widely seen as one of the eurozone countries most vulnerable to higher government borrowing costs, traded flat after losing 1% in the previous session .
Economists expect U.S. inflation data released Thursday to show consumer prices rose at an annual rate of 7.3% in January, a four-decade high.
The yield on Italian 10-year bonds, however, rose 0.03 percentage points to 1.84% on Tuesday morning. The yield on the 10-year German Bund rose 0.02 percentage points to 0.24%. Until last month, this barometer of broader eurozone borrowing costs had been below zero since May 2019.
Elsewhere in the markets, the U.S. dollar index rose 0.3% as bets on a rate hike climbed ahead of this week’s CPI data.
Futures markets implied that the S&P 500 stock index and the technology-focused Nasdaq 100 would trade flat when they opened in New York.
Brent, the oil benchmark, fell 1% to $91.78 a barrel, but remained near its highest level since 2014.
Read the full market briefing here.