* Dutch bond yield spread over Germany near 1-year highs
* Finnish bond yields rise as PM calls coalition into
* U.S.-Germany spread near 1-month high as Fed rate hike
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Abhinav Ramnarayan
LONDON, June 13 Euro zone bond yields rose
across the board on Tuesday as a lack of progress in forming a
government in the Netherlands and the risk of snap elections in
Finland put a damper on political optimism around Europe.
On Monday, euro zone government bond yields dropped as the
first round of French parliamentary elections pointed to a
landslide for President Emmanuel Macron's party while Italy's
anti-establishment 5-Star Movement suffered in mayoral
But while political risks may have diminished in southern
Europe, political uncertainty persists in some countries in the
"We have had some major political news in Europe in the last
few days, and though the French and Italian news has been much
more in focus, we also have some negative news from other
parts," said DZ Bank strategist Daniel Lenz.
"In the Netherlands, the second attempt to build a coalition
failed and in Finland there is a possibility of snap elections."
Euro zone bond yields rose 1-2 basis points across the board
on Tuesday. The yield on Germany's 10-year government bond
, the benchmark for the region, was up 1.6 basis
points at 0.27 percent.
Dutch government bonds are normally slow to react to
political concerns, given the country's triple-A rating and
economic and fiscal strength.
But the Dutch 10-year bond yield spread over Germany hovered
near one-year highs of 22 bps ahead of an auction of 10-year
Dutch political parties have struggled to form a government
since a general election in March.
Finnish 10-year bond yields rose 2 bps to 0.345 percent,
following news that Prime Minister Juha Sipila will break up his
three-party coalition, saying he wanted to eject the nationalist
The "transatlantic spread" between German and U.S. 10-year
borrowing costs were close to one-month highs at 195 bps as U.S.
ratesetters were set to begin a two-day meeting later on
Expectations are for the Fed to raise its benchmark interest
rate on Wednesday and to potentially provide more detail on its
plans to shrink the mammoth bond portfolio it amassed to nurse
the economic recovery.
Elsewhere, euro zone finance ministers and the International
Monetary Fund are likely to strike a compromise on Greece on
Thursday, paving the way for new loans for Athens while leaving
the contentious debt relief issue for later, officials said.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Abhinav Ramnarayan; Editing by Richard Balmforth)