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Germany’s 10-year bond yield rose above 0% for the first time since 2019 on Wednesday, marking a potential turning point for euro area debt characterized for years by negative yields thanks to copious central bank support to fight deflationary forces.

The 10-year yield, considered a benchmark for the whole euro zone, rose as high as 0.025%, and was last up 2 basis points on the day.

Gareth Hill, fund manager at Royal London Asset Management, called the move above zero a “very key level”, seeing it as a reflection of policy tightening by the European Central Bank.

“Pushing through that zero barrier is indicative really of the path of things to come with higher yields across the board.”

With the move in Germany, all 10-year benchmark government bonds now carry positive yields globally, according to Refinitiv data.

The rise in German yields reflects record-high inflation in the euro area and an economy recovering from the COVID-19 pandemic that is allowing the ECB to pare back the monetary stimulus that has depressed the bloc’s bond yields for years. The immediate move above 0% comes as euro zone bond markets pulled forward their bets on a 10 basis-point rate hike from the ECB to September, and are betting on a second rate hike by December.

The bets are at odds with ECB economic projections and policymakers’ suggestions that the bank won’t raise rates this year. They mirror the United States, where investors bet the U.S. Federal Reserve may hike rates in March and another three times by the end of the year.

Fed policymakers have also signalled they may shrink the bank’s $8 trillion-plus balance sheet by offloading bond holdings.

Those concerns have driven euro zone bond yields, which move inversely to prices, higher in recent weeks with 10-year German yields rising nearly 40 bps over the last month, tracking moves in U.S. Treasuries.

Unease as the European Central Bank plans to end its pandemic emergency bond purchases in March, which will leave it conducting conventional bond purchases that are less than what some investors had expected, has also driven yields higher.

That is expected to lead to the net supply of bonds issued by euro zone governments outstripping ECB purchases for the first time since 2019.

A fiscal policy expert from Germany’s Free Democrats (FDP) said that a return to positive yields on federal bonds will wipe out a budget buffer that has existed in recent years.

Still, the rise in German yields is less than on U.S. Treasuries, where 10-year yields are up around 50 bps in the last month, reflecting diverging policy paths between the U.S. Federal Reserve and the ECB.

Most investment banks expect Bund yields hovering around 0% at the end of the year or slightly higher.

Yields also rose across the broader market on Wednesday and Italian, Spanish, Portuguese and Greek yields all briefly touched their highest since May or June 2020.

Focus was also on debt sales, with Greece and Austria launching syndicated bond sales, while Germany re-opened a 15-year bond at auction.

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