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Germany's benchmark borrowing costs rose to the highest level in more than 18 months Thursday and the euro surged against the U.S. dollar after minutes from the European Central Bank's last policy meeting hinted at a possible tapering of the Bank's quantitative easing program.

Benchmark 10-year German government bonds, known as bunds, rose 9 basis points to 0.56% Thursday, the highest level since December 2015, while benchmark 10-year yields for French government bonds, known as OATs, were marked 10 basis points higher at 0.91%. The increased followed official accounts which indicated that members of the Governing Council, the ECB's equivalent to the FOMC, talked about removing a bias for further QE expansion. The reference was left in the ECB' June 8 statement, but the discussion suggests a slow but gradual move towards tapering the €60 billion monthly purchase pace.

"While there were valid reasons at this juncture to retain the (QE) easing bias, it was noted that, as the economic expansion proceeded and if confidence in the inflation outlook improved further, the case for retaining this bias could be reviewed," the accounts read.

The euro, which had traded in negative territory against the U.S. dollar for most of the morning session, rose 0.34% to 1.1408 following the release of the accounts.

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The move in bunds extends rise of more than 30 basis points in yield since ECB President Mario Draghi hinted last week that the Bank could begin slowing or reversing some of its accommodative monetary policies as the region's recovery accelerates. 

The threat of deflation is gone and reflationary forces are at play," Draghi told an audience of central bankers and economists in Sintra, Portugal on June 27 in a speech that was widely interpreted as a signal that the Bank could begin tapering its quantitative easing program. "And since one of the drivers of inflation today is positive supply developments, this should feed back positively into potential output rather than produce hysteresis. In these conditions, we can be more assured about the return of inflation to our objective than we were a few years ago."

Private sector data published Wednesday showed the region's economy capped its best quarter in at least six years, adding to investor bets that interest rates are set to rise from their record lows as the recovery finds its feet.

The IHS Markit Composite PMI survey of economic activity for the month of June was marked at 56.3, a modest decline from the 56.8 tally recorded in May but firmly higher than the flash estimate of 55.7. Activity in the services sector, Markit said, slipped to 55.4 from 56.3, but was still ahead of the original estimate of 54.7 and well ahead of the 50 mark that separates economic growth from contraction.

Markit said the readings suggest an "impressive" GDP growth rate of 0.7%.