Euro zone inflation bets near new 7-year high

Short-dated euro zone bond yields jumped and long-term inflation expectations were at a new seven-year high on Thursday, putting pressure on European Central Bank officials to address the issue of rising inflation when they meet later in the day.

At the same time, the gap between Germany's 10-year and 30-year bond yields shrank to its narrowest level since March 2020, pointing towards  "stagflation" worries among bond investors.

The ECB is all but certain to keep policy unchanged when it meets on Thursday and push back against growing expectations for an interest rate hike next year, even though it may admit that inflation will be higher than projected.

Policymakers around the world are under pressure to re-examine the unprecedented levels of stimulus they have been pumping into the economy in the face of high inflation.