Euro Zone Bond Yields Steady

Euro zone government bond markets were steady on Friday after a volatile week in which yields hit their highest levels in months before falling back as investors grapple with strong inflation readings and economic recovery concerns. Worries around stagflation - a rise in consumer prices without a commensurate increase in economic growth - have left investors confused about whether the high inflation readings will lead to sharp monetary policy tightening. As a result, euro zone government bond yields have fallen back from a 5-month high hit earlier in the week. In recent weeks, inflation expectations have soared with a key market gauge of long-term euro zone inflation, the 5-year forward inflation swap, hitting a 6-year high of 1.8417% this week. But many of the expectations stem from supply chain disruptions and a rise in energy prices around the world, which suggests that global policymakers may be reluctant to endanger a global economy only just recovering from the COVID-19 crisis.