Unexpectedly strong inflation data sent eurozone yields down to the highest level in the last 10 years on Tuesday, while waiting for the peak of the deposit rate European Central Bank increased to almost 4%.

OUR annual inflation in France unexpectedly rose to 7.2% in February from 7.0% in January.

Consumer prices in Spain increased by 6.1% year on year in February, a faster pace than the 5.9% in the 12 months to January and above the 5.7% that analysts polled by Reuters expected.

OUR German 10-year bond yield DE10YT=RR rose 5.5 basis points to 2.64% after reaching the highest level since July 2011 at 2.662%.

“We will probably have to wait until the second quarter to see the peak of inflation in France, and until the summer to see how inflation really comes down,” said the ING research department. Padraig Harvey.

The key indicator of the market of long-term inflation expectations of the Eurozone hit a new 9-month high of 2.4825% EUIL5YF5Y=R.

German two-year bond DE2YT=RRmore sensitive to interest rate expectations, reached its highest level since October 2008 at 3.161%, while it last rose 7 basis points to 3.133%.

The ECB short-term euro rate (ESTR) for December 2023 rose to 3.835% after being raised to 3.875%, a level that implies a deposit rate of 3.975% until the end of the year. EUESTECBF=ICAP

“Inflation data continues to drive markets,” said Massimiliano Maxia, senior fixed income specialist at Allianz Global Investors.

The yield on Italy’s 10-year IT10YT=RR bond rose 8 basis points to 4.498% after hitting its highest since Jan. 3 at 4.549%.

Reuters