(Bloomberg) -- European government bonds fell after European Central Bank President Jean-Claude Trichet signaled an increase in interest rates probably next month.
Benchmark two-year yields are at the highest in five years as Trichet pledged ``strong vigilance'' to combat inflation, a term he used in the past to indicate a rate increase is imminent after the bank left rates unchanged today. Short-term yields have climbed about 30 basis points since the ECB last lifted borrowing costs in March, as traders bet rates will rise twice more this year to 4.25 percent.
Read more at Bloomberg Bonds News
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