* German yields hold above one-month lows
* 10 pct oil price rise boosts inflation outlook
* France’s Macron clashes with Le Pen in presidential debate
* Polls show Macron has most convincing programme
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, April 5 (Reuters) - A surge in oil prices and easing concerns over France’s upcoming presidential election appeared to put the brakes on a fall in euro zone government bond yields on Wednesday.
Germany’s 10-year bond yield -- the bloc’s benchmark -- has halved over the last three weeks as investors reassessed fiscal stimulus from the United States and the time scale for the withdrawal of monetary easing in the single currency area.
But a near 10 percent rise in the price of oil over the last fortnight, and the inflationary impact that will bring, has started to make money managers reconsider the outright level of yields.
One of the justifications for these levels is the political risk presented by next month’s French presidential election, where eurosceptic Marine Le Pen is one of the leading contenders.
Her chances though were seen diminishing after a TV debate on Tuesday where a snap poll showed her as the fourth-most-convincing candidate, trailing Jean-Luc Melenchon, Emmanuel Macron and Francois Fillon.
“The rally has been strong in recent days and an interruption in this trend should be expected,” ING’s senior rates strategist Martin van Vliet said.
“With the TV debate in France not showing a surprisingly strong showing for Le Pen, the flight to safety theme is weakening.”
Analysts said the sale of four billion euros of five-year bonds from Germany on Wednesday and caution ahead of the release of minutes from the U.S. Federal Reserve’s latest meeting was also keeping yields in a holding pattern. Investors tend to sell existing bonds in their portfolio to make room for new supply.
German 10-year bond yields rose 1 basis point to 0.26 percent on Wednesday, off a one-month low of 0.24 percent breached Tuesday but still well off a 14-month high of 0.51 percent seen in the middle of last month.
Most other euro zone yields were flat or slightly higher on the day.
The gap between French and German bond yields was a fraction tighter after the presidential debate in which leading candidate Macron clashed sharply with Le Pen over Europe.
While polls showed Macron lost out to the far-left’s Melenchon as the most convincing performer in the debate, his plan for office was seen as the most credible of all the candidates.
With political fears easing, investor attention switched to oil which climbed near one-month highs on signs of a gradual tightening in global oil inventories and concerns about a supply outage at a field in Britain’s North Sea.
The oil rise is expected to feed through into future inflation gauges closely watched by policymakers in the European Central Bank, some of whom are arguing that economic conditions warrant the withdrawal of its bond-buying scheme.
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