The rally that took yields on 10-year German sovereign bonds down to 0.04% on 17 April has since turned into a full scale rout. Data on the level of inflation in the eurozone, released in the first week of June 2015, has not helped matters. The annual rate of inflation in the eurozone was 0.3% in May 2015, up from 0.0% in April according to the flash estimate published on 2 June 2015 by Eurostat (the European Union’s statistical office). Exhibit 1 below illustrates how the headline inflation rate has bounced backed into positive territory since the start of 2015.

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Return of inflation exacerbates the rout in eurozone bond markets