LONDON, Aug 31 Reuters Germany39;s borrowing costs rose to their highest level in over two months on Wednesday, and were set to end August with their biggest monthly surge in over 30 years, as data showed inflation in the euro area hitting another record high.

Bond markets across Europe have been battered this month as surging gas prices, fueled by concerns about supplies from Russia, exacerbated inflation fears and pushed up expectations for higher interest rates even as recession fears grow.

Euro zone inflation rose to another record high at 9.1 this month, beating expectations and solidifying the case for further big European Central Bank rate hikes.

Significantly, closelywatched underlying price growth, which filters out volatile food and energy prices, jumped to 5.5 from 5.1.

The most disappointing aspect of the inflation data is the core measure, where we have a bigger increase than in the headline measure, said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Even though we will get more support measures to help ease the gas crisis, inflation will move higher unless policymakers can get a better grip on gas markets in the euro area.

In a sign of the scale of the unease gripping investors, bond markets were set to end August with heavy price losses that have sent yields soaring.

In Germany, the euro zone39;s benchmark bond issuer, twoyear yields rose to their highest since midJune at around 1.2 and were last up 3 basis points on the day….