By Dhara Ranasinghe

LONDON, (Reuters) – The euro zone’s beaten bonds gained ground Thursday but ended March with one their largest sell-offs since 2009 as rising inflation risk and rates-hike threats meant that German Bund yields were on course for the biggest monthly increase since 2009.

Ten-year yields for most currency groups fell by around 7-8 basis point after Spanish and German inflation prints were released.

French inflation reached a new record of 5.1% in March according to data released Thursday. However, bond investors were able to take some relief from falling oil prices.

Inflation is on the rise, raising expectations that the European Central Bank will raise interest rates soon. A more aggressive stance by the U.S. Federal Reserve has sent the bond market reeling.

Germany’s 10-year Bund Yield, which fell five basis points to 0.59% in March, has increased 42 bps in March. It is expected that the month will end with the greatest monthly rise since 2009. They would see the largest move since 1996 if yields continue to rise.

The two-year German yields have increased by 48 basis points this month, just below 0%. This is their largest monthly increase since 2011.

With monthly rises exceeding 40bps, the Dutch 10-year bond yields and those of France were poised for their highest monthly growths since 2012 and 2011, respectively.

ING Senior Rates Strategist Antoine Bouvet said, “This is extremely significant.” A move like this will cause investors to reconsider the risks of their bonds portfolio and make market participants that believed they were safe from rates risk, hedge them.

According to Philip Lane, chief economist of the ECB on Thursday, the Eurozone’s inflation will stabilize at around 2%. However the outlook could be impacted by Russia’s war in Ukraine.

Similar milestones were seen in major debt markets, with yields rising in the euro zone bond.

According to data from Refinitiv, the U.S. 2-year Treasury yields have increased by 85 bps in March. This is their largest monthly rise since 1989. The quarter’s increase is 155bps, which marks the largest quarterly jump since 1984.

Commerzbank’s (DE:), bond analysts claimed that investors seem unwilling “to capture the falling knife” and, with inflation headwinds continuing to build and aggressive exit pricing for monetary policy still popular, they were sticking with their opinion that German bonds will continue to fall.