Euro zone bond yields hover near 2-week highs, supply, trade hopes dominate

Reuters | Jan 14, 2020 at 8:04 AM

* Euro zone periphery govt bond yields

LONDON, Jan 14 (Reuters) - Benchmark 10-year government bond yields in the euro area hovered near their highest levels in almost two weeks on Tuesday, as the imminent signing of a U.S.-China trade deal and a fresh wave of bond supply dented the appeal of fixed income.

With the world's two biggest economies a day away from signing a Phase 1 trade agreement, signs of goodwill from both sides bolstered sentiment in world markets.

The U.S. Treasury said on Monday that China should longer be designated as a currency manipulator.

"For now it's risk-on and consistent with that there was a broad-based sell-off in fixed income yesterday," said Deutsche Bank strategist Jim Reid.

Germany's benchmark 10-year Bund yield was steady around -0.19%, its highest level in almost two weeks, having risen 4 basis points on Monday.

French and Dutch 10-year bond yields traded close to highs hit on Monday.

Analysts said a second straight week of hefty new supply in the currency bloc should add to upward pressure on bond yields.

Italy is scheduled to sell three, seven and 20-year government bonds later in the day, while Spain is expected to launch the sale of a new 10-year bond via a syndicate of banks as early as this session.

On Monday, Spain mandated banks for a new bond deal in a sign that it would be launched soon.

The Dutch meanwhile are expected to tap an existing Green bond for an estimated 1.3 billion euros.