July 7 Reuters Euro zone bond yields rose on Thursday, tracking overnight moves in U.S. Treasuries as the tussle between inflation and recession fears continued to grip markets.

A deteriorating inflation situation and concern about lost faith in U.S. Federal Reserve39;s power to make it better prompted U.S. central bank officials to rally around an outsized interest rate increase and firm restatement of intent to get prices under control, the minutes of the bank39;s June meeting where it hikes rates by 75 basis points showed on Wednesday.

Following overnight moves that saw U.S. Treasury yields end the session 1115 basis points higher, also driven by economic data, euro zone followed suit on Thursday.

Jens Peter Sorensen, chief analyst at Danske Bank, said the minutes showed an aggressive Federal Reserve, where the need to curb inflation is the main focus as the minutes focused on inflation rather than the risk of a recession.

In Europe, the bond market has not fully followed the move from U.S. Hence, we expect that European yieldsrates will catch up fairly fast this morning, he added.

After touching fiveweek lows on Wednesday at 1.072, Germany39;s 10year yield, the benchmark for the euro area, was up 10 basis points on the day to 1.25 by 0729 GMT.

The twoyear yield, sensitive to rates expectations, was up 7 bps to 0.45, having dropped as low as 0.27.

Italy39;s 10year yield rose 7 basis points to 2.30, tightening the closelywatched spread over Germany at 204 bps….