Are European bond markets having an identity crisis?

Live in the UK, this is the Marketplace Morning Report from the BBC World Service.

I'm Leanna Byrne. Good morning. Bonds, borrowing costs, we've been talking about them

and the uncertainty in those markets for a few days. But this isn't just a UK story.

Across Europe, economic challenges and political shifts

are shaking up what were once considered safe investments. So what's behind this change? Let's ask

Bill Blaine, principal and founder of Windshift Capital. Hello.

Good morning. Bill, what is driving this uncertainty in European bond markets right now?

Well, there's nothing particularly new that is driving the rising yields that we're seeing.

There are largely a factor of an understanding that the world has changed.

Inflation has become what we call sticky.

It's not about to tumble back to the close to zero inflation rates we saw.

Now, that means that all bond yields have increased because investors fear inflation more than anything else.

And within that, there's kind of a rejigging, isn't there, about who is deemed as risky and who's not?

Because traditionally bonds like countries from Greece and Spain and Italy, they were seen as much riskier investments compared to Germany and France.

But now that gap and yields, it's narrowed, hasn't it?

Yes, and that's one of the extraordinary things here,

because when you say that investors are looking at bond yields and applying a different way of

thinking, what they're looking at is what is the risk that these economies are going to repay me

when that bond is due to mature. Now, in the past, it's always been understood that

strong countries are most likely to pay back their debt without much trouble. But because the

quantum of debt that nations have issued has increased dramatically, and also political

...