LONDON Jan 13 Euro zone bond yields rose on
Friday after comments from U.S. policymakers overnight prompted
concerns that monetary policy in the world's largest economy
could tighten faster than previously expected.
Federal Reserve officials said on Thursday that fiscal and
tax plans sketched out by the incoming Trump administration
could trade a short-term economic boost for inflation and debt
problems they might have to counteract.
This pushed 10-year U.S. Treasury yields up to
2.38 percent late on Thursday, a rise of 8 basis points (bps)
from the trough hit earlier in the day.
Euro zone bond yields, which typically move in sympathy with
U.S. Treasury yields as many investors invest in both, rose 2-4
bps across the board in early trades on Friday.
Germany's 10-year bond yield, the benchmark
for the region, was up 2 bps at 0.25 percent by 0845 GMT.
"The picture is a little bit mixed but the overall tone of
the Fed speakers was more hawkish, that's probably why we are
seeing yields move to the upside today," said DZ Bank strategist
Government bond yields in the major economies globally have
been rising since the election of Republican Donald Trump as the
next U.S. president on expectations that increased spending will
boost inflation and growth in the U.S.
That move reversed a little earlier this week as Trump's
long-awaited news conference on Wednesday offered little clarity
on his fiscal plans.
However, as investors have also been keeping a close eye on
what effect the incoming president's plans will have on monetary
policy, the comments of the policy makers are pushing yields up
Investors will also keep a close eye on Italian bonds ahead
of a crucial review of the country's credit rating by DBRS.
The Canadian agency is one of the four used by the European
Central Bank and a downgrade would see the ECB increase the
'haircut' it applies to Italian bonds, piling extra stress on
the country's banks that rely on its interest-free funding.
The yield on Italy's 10-year government bond
was up 3 bps to 1.93 percent by 0845 GMT, slightly
underperforming many of its peers.
For Reuters new Live Markets blog on European and UK stock
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(Reporting by Abhinav Ramnarayan; Editing by Andrew Heavens)