Euro zone government borrowing costs rose on Tuesday as a global sell-off in bond markets, the trigger for which is hard to pin down, showed no sign of abating.

Analysts have said in the past two weeks that the sell-off was partly sparked by an uptick in inflation expectations amid a rise in oil prices and unease about record low yields.

But with risk appetite compromised by the financial crisis in Greece, the full picture is more complex.

In historical terms, inflation is still very low, so the most common theory is that, before data on April 29 showing higher than expected German inflation, the market was almost unanimous in its positioning for Bund yields to fall to zero, driven by the European Central Bank’s 1 trillion euro bond-buying programme.

A few sell orders then snowballed into a concerted sell-off as investors were unwilling to bear large losses on what was previously considered a safe-haven asset.

When yields are close to zero, the pain of a market turnaround is higher then it would have been if the change in trend occurred at higher levels. The current low coupons cannot compensate for the fall in prices.

“It’s clear that the market hasn’t stabilised. Before the sell-off started the common perception was one of low volatility,” said Jan von Gerich, chief fixed income analyst at Nordea. “Now investors are more cautious, asking for a premium for the volatility we’ve seen recently.”

Ten-year Bund yields were 8 basis points higher at 0.67 percent on Tuesday, having dipped as low 0.05 percent in mid-April.

The sell-off went global, as every other market had to adjust for the higher yields on benchmark Bunds, which had become the fixed income asset of choice.

U.S. 10-year T-note yields traded at their highest levels since December at over 2.30 percent, while Japanese 10-year yields were a touch below their 2015 highs, trading above 0.45 percent.

Low market liquidity caused by the central banks hoovering up bonds through QE and regulations limiting market makers’ ability to warehouse bonds is said to have exacerbated moves.

“It’s not really obvious what caused the sell-off,” Deutsche Bank said in a note. “Everyone seems to have different theories…What most traders have said though is that liquidity is awful.”


Adding another layer of uncertainty to the crisis in Greece,

EU paymaster Germany suggested on Monday that Athens might need to call a referendum to approve painful reforms on which its creditors are insisting.

Euro zone finance ministers welcomed some progress on a financial aid deal but said more work was needed.

A relatively steady difference between the yields on the euro zone’s lower-rated bonds and those of Bunds suggested the market was disregarding Greece for the moment. Spanish and Italian 10-year yields were up 9 bps each at 1.84 percent and 1.85 percent, respectively.

Some analysts say the rise in yields was something that simply had to happen sooner or later.

“I don’t have an answer for what was the exact trigger for this correction, but it was going to happen at some point,” said Luca Cazzulani, rate strategist at UniCredit.

“The only way people have been trading bonds since January was that the ECB would squeeze the market and this would push yields to possibly negative levels. No theory with respect to deflation or growth. Nothing.”