Rising oil and natural gas prices triggered a selloff in European government bonds, with the yield on 30-year German Bunds climbing nearly 6 basis points to 3.97%, marking the largest single-day increase since September 9.

Traders pared back their bets on European Central Bank interest rate hikes over the next five months after ECB President Christine Lagarde said that the rise in bond yields since the last policy meeting would weigh on the economy and inflation. Her remarks also pressured the euro, which fell as much as 0.3% before recovering slightly.

UK gilts also came under selling pressure, with the 2-year yield rising as much as 10 basis points to 4.94%. The market showed little reaction to UK Chancellor of the Exchequer John Healey's speech at the Labour Party conference reaffirming fiscal discipline.

Market Overview

German government bond yields rose 4 basis points to 3.64%; German government bond futures fell 14.00 points to 119.35; Italian 10-year government bond yields rose 8 basis points to 4.59%; the Italy-Germany government bond spread widened 4 basis points to 95 basis points; French 10-year government bond yields rose 8 basis points to 4.77%; 10-year UK government bond yields rose 6 basis points to 5.42%.