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European Government Bonds May Fall on Concern Inflation Is Accelerating

EU

European government bonds may fall after a report showed producer price inflation in Germany, Europe's largest economy, accelerated last month by the fastest rate in almost 24 years, led by higher energy costs.

Oil prices averaging more than $60 a barrel since the middle of last year have boosted companies' costs, increasing concern at the European Central Bank that they may feed through to consumer prices and lead workers' to demand higher wages. A report last week showed consumer prices in the euro region gained at the quickest rate since October. Futures traders are adding to bets the ECB will raise rates twice more this year.

Consumer prices in the euro region rose 2.5 percent from a year earlier after gaining 2.4 percent in April, the European Union's statistics office said June 15. The reading matches an initial estimate of May 31 and the median forecast in a Bloomberg survey. Inflation erodes the value of a bond's fixed payments. (Bloomberg)

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