Since the European Central Bank announced it extraordinary monetary policy measures in January, German Bund yields have fallen significantly, with many market watchers expecting yields on the 10-year to fall into negative territory.
Hints of a more entrenched recovery in the euro zone were supported earlier on Wednesday after fresh money supply data, which shows the health of lending, exceeded expectations. German inflation is also likely to remain above zero for a second month in a row in April, data from some of German's federal states suggested on Wednesday.
Yields hit a record low of 0.049 percent in intraday trading earlier this month, as the European Central Bank's 60-billion-euro-a-month bond-buying stimulus program weighed on yields.
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Last week, yields traded around 0.125, and Wednesday's move higher has reversed half of the fall in yields seen since the ECB launched its quantitative easing plan.
"The moves started a few days ago after the U.K.'s slightly hawkish Monetary Policy Committee (MPC) minutes, which put gilts in a tailspin. Since then the market has been looking for an excuse to sell other markets," David Roberts, head of fixed income at Kames Capital, told CNBC.
"Technical traders looking at these levels tend to get a bit jittery, which adds to the volatility, which is why you can get several days in a row of material moves like we have seen today," Roberts who is short the 5-year and 30-year German government bonds, added.
One expert who expected this move was former Pimco star bond fund manager Bill Gross, who now runs the Janus Global Unconstrained Bond Fund. Last week he told CNBC that 10-year German bund was "the short of a lifetime" and declared it was only a matter of time before prices took a tumble.