The European Central Bank reckons it can defy a record of aborted interest-rate hikes as it raises borrowing costs while confronting a recession threat and Italian political turmoil.

The half-point increase delivered on Thursday allows President Christine Lagarde and her colleagues to join the global fight against inflation with a larger-than-expected initial salvo -- carrying the risk of doubling down on another policy error.

This is the third time in the near quarter-century of the ECB’s history that it’s raised rates with a crisis of some sort blazing in the background. On each occasion it did so in July -- and both prior hikes were reversed within months.

Eoin Treacy's view

The big background question for bond markets is whether countries with a high median age population can also have high bond yields. Until now there has been a clear correlation between the aging populations of Japan, Germany and Switzerland and their low yields. The USA has a higher median age but that is not a permanent condition. The reluctance to increase immigration is not going to improve that trend.

The ECB is back attempting to increase interest rates. There is every reason to expect the deflation will become problematic before long and interest rates will be have to come back down.

10-year Treasury yields also compressed further today and the risk of a failed upside break is looking increasingly likely.