Euro zone government bond yields rose on Thursday, with Germanys 30year yield rising to its highest in more than a year, tracking U.S. Treasuries as markets focused on uncertainty about the outlook for inflation.

The Federal Reserve said it expected higher economic growth and inflation in the U.S. this year and repeated its pledge to keep its target interest rate near zero.

Although the bond market reaction after the Feds press conference was mixed, U.S. yields picked up as European markets opened.

The 10year Treasury bond yield rose above 1.74 for the first time since January 2020. Market participants were uncertain about the impact of the Feds new framework of allowing inflation to overshoot.

We have this uncertainty as to what is the outlook for inflation, if the Fed is going to sit idly by, should we be concerned that a pickup in inflation now may actually morph into something more sustained? said Richard McGuire, rates strategist at Rabobank.

A very significant amount of the rise in longdated yields that we have seen through the recent selloff is term premium its uncertainty, he said.

Europes government bond yields also rose, tracking the pickup in U.S. yields but to a lesser extent.

Germanys benchmark 10year government bond yield was at a 20day high of 0.258 at 1146 GMT, up around 4 bps on the day . Italys 10year yield was up around 2 bps at 0.721 .

The long end of the curve rose more, with the German 30year yield reaching its highest since January 2020….