(Adds euro zone PMI data, graphic, updates prices)<\/p>\n
LONDON, Oct 5 (Reuters) – Euro zone government bond yields hovered near recent highs on Tuesday as oil prices hit a three-year peak, sparking inflation concerns and potential monetary policy tightening from the world\u2019s major central banks.<\/p>\n
OPEC+ said on Monday it would stick to an existing pact for a gradual increase in oil output, sending crude prices soaring and adding to inflationary pressures that consuming nations fear will derail an economic recovery from the pandemic.<\/p>\n
Government bonds are normally viewed as a haven for investors in times of trouble, but inflation has been a major area of concern for investors as they try to position for the removal of unprecedented central bank stimulus.<\/p>\n
\u201cThe spike in energy prices has led to renewed fears about inflation accelerating even further than current forecasts are implying, with knock-on implications for central banks and the amount of monetary stimulus we can expect over the coming months,\u201d Deutsche Bank strategist Jim Reid said.<\/p>\n
Stock markets worldwide have also been hit by rising energy prices and concerns over potential debt defaults by Chinese property groups, but Reid said government bonds cannot be a great haven if the selloff is partly inflation related.<\/p>\n
Euro zone government bond yields held on Tuesday near three-month highs hit last week.<\/p>\n
Germany\u2019s 10-year government bond yield, the benchmark for the region, was slightly higher at -0.218%. That is a full 30 basis points higher than where it was two months ago.<\/p>\n
Other European government bond yields were flat to a touch higher, with 10-year Gilt yields edging close to a two-year high as Brexit-fuelled supply constraints added to inflationary pressures in Britain.<\/p>\n
Business growth across Europe remained strong last month but elevated inflationary pressures put a dent in demand while ongoing supply issues constrained activity, issues which are likely to continue, a survey showed on Tuesday.<\/p>\n
Inflationary sentiment is at its apex in the United States, where the Federal Reserve has already indicated that it will \u201ctaper\u201d the extraordinary bond purchases introduced during the COVID-19 crisis.<\/p>\n
German and U.S. real yields — borrowing costs after accounting for inflation — have diverged sharply in recent weeks.<\/p>\n