UK and euro zone government debt sold off as investors gauged how far central banks would raise interest rates to curb inflation.

The UK’s two-year gilt yield, which is particularly sensitive to interest rate changes, rose 0.22 percentage points to 2.90 percent, marking a sharp decline in prices. The 10-year gilt yield rose 0.12 percentage points to 2.69 percent.

Those sharp moves came as money markets priced in investors expecting the Bank of England to raise borrowing costs to about 3 percent in November, up from 2.6 percent a week ago and the current base rate of 1.75 percent. Data released last week showed UK inflation hit a 40-year high in July.

Antoine Bouvet, senior strategist at ING, said the announcement that the UK Debt Office would sell £1.5bn of short-term gilts on Tuesday added to the anxiety. The sell-off comes as liquidity, or the ease of buying and selling bonds, in Europe’s fixed income markets has been strained by summer holidays and heightened economic uncertainty.

“It’s not a big deal by any stretch of the imagination, but it shows that when you add supply to an illegal and highly volatile market, the impact can be huge,” Bouvet said.

The more volatility occurs in a gilt, the worse the liquidity, he added. “It’s a bit of a chicken and egg situation.”

Short-term euro zone bond prices also fell, with the two-year German bund yield up 0.08 percent to 0.90 percent and Italy’s equivalent debt instrument up 0.05 percentage point to 1.87 percent.

Investors were expecting the European Central Bank on Wednesday to implement a 1 percent interest rate hike in October from the current deposit rate. The ECB raised interest rates by half a percentage point in July, the first increase in more than a decade.

Higher bond yields and higher inflation in Europe and the UK signal rising inflationary concerns as natural gas prices rise sharply. The European gas benchmark rose 15 percent on Wednesday to a new close of €300 per megawatt hour, while UK prices rose 13 percent to £5.58. This compares to €200 and £3.49 at the beginning of August.

Europe’s regional Stoxx 600 rose 0.2 percent. In Asian markets, Hong Kong’s Hang Seng closed up 1.2 percent and China’s main CSI 300 gauge fell 1.9 percent, as the country’s massive housing market debt continued to rise.

U.S. markets were further closed as investors closely awaited the central bank conference that begins on Thursday. Wall Street’s benchmark S&P 500 stock index erased most of its early gains to rise 0.2 percent in mid-afternoon trading. The technology-heavy Nasdaq Composite rose 0.5 percent.

The Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming, is often used by policymakers to provide guidance on its future policy stance, and investors watch for insight into how much the central bank will raise interest rates for the rest of the year.

“Caution is the name of the game in equity markets, as aggressive policies to tame inflation are expected to continue despite new signs that the US economy is slowing.”

Minneapolis Fed President Neel Kashkari, formerly known as the US central bank’s policymaker, said Tuesday night that the combination of “high employment” and “very high inflation” made the Fed’s approach “very clear: We need to tighten monetary policy.” Bringing things into balance”.

On Wednesday, the Commerce Department reported that spending on big-ticket items at U.S. factories rose slightly more than economists expected in July. However, the National Association of Realtors’ index for pre-owned U.S. homebuyers fell 1 percent in July, underscoring pressure from rising interest rates in the housing market.