Aug 25 Reuters Euro zone government bond yields were lower but not far from multiweek highs on Thursday after the European Central Bank39;s July meeting minutes.

ECB policymakers appeared increasingly concerned that high inflation is getting entrenched and the risk was large enough to warrant a biggerthanflagged rate hike. 

ECB minutes did not trigger any price action as analysts expected them to be tilted on the hawkish side.

Money markets keep pricing in around 100 bps of ECB rate hikes by October. A 50 bps hike is fully priced in for September, plus around a 20 chance of a 75 bps move.

Those bets have recently risen significantly with another sharp rise in natural gas prices and Russia signalling further supply squeezes.

These have fuelled inflation fears in the euro zone, where price growth rose to a record high of 8.9 in July, more than four times the ECB39;s 2 target, and triggered hawkish rhetoric from ECB policymakers.

On Thursday, by 1151 GMT, Germany39;s 10year government bond yield was down 3 bps to 1.33 after touching 1.39 at the start of the day, the highest since early July that it first rose to on Wednesday.

The twoyear yield fell 7 bps to 0.84, having risen to 0.94 on Wednesday.

In the past week and a half or so, the bond rallies we had in the morning were heavily sold into so let39;s see if this is the case again or if we are seeing a shortcovering rally ahead of Jackson Hole, said Antoine Bouvet, senior rates strategist at ING. He was referring…