UK and European short-term bonds underperformed as traders raised their rate hike bets on the Bank of England and the European Central Bank following a rebound in oil prices.
The UK two-year gilt yield rose 4 basis points to 4.92%; the swaps market priced in 19 basis points of Bank of England rate hikes by December and 90 basis points by the end of 2027, up from 17 basis points and 81 basis points at the start of the trading day.
The German two-year bond yield rose 3 basis points to 3.13%, touching a two-week high; the swaps market priced in 24 basis points of European Central Bank rate hikes by December and 71 basis points by the end of 2027, up from 23 basis points and 65 basis points earlier.
Brent crude rose 2.6% to $94 per barrel, and stocks advanced; the US Treasury cash market was closed for a holiday.
Market: German bund yields held steady at 3.32%; German bund futures fell 19 ticks to 122.46%; Italian 10-year bond yields fell 3 basis points to 4.35%; the Italy-Germany bond spread narrowed 3 basis points to 103 basis points; French 10-year bond yields fell 1 basis point to 4.79%; 10-year UK gilt yields rose 1 basis point to 5.23%.
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