(Bloomberg) -- German government bonds tumbled as investors prepared for interest rates in the euro area to remain elevated for longer, sending the 10-year yield to the highest level in over a decade.
The rate on the securities — a benchmark for borrowing costs in the region — jumped 7 basis points to 2.77%. The latest moves follow hawkish messaging by the Federal Reserve on Wednesday and data that points to persistent strength in the US labor market.
The outlook is also feeding though to markets in Europe, where money markets are betting on just over two quarter-point cuts by the European Central Bank next year, the fewest since the middle of last month.
Further out, the market is pricing the ECB's deposit rate will remain above 3% over the next couple of years, a sea-change for a region accustomed to years of ultra-loose policy.
--With assistance from James Hirai.
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