* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, Nov 7 (Reuters) - European government bond yields rose, with benchmark German bond yields heading towards their highest in more than three months, as hopes grew for a U.S.-China trade agreement.
A streak of rising yields lasting nearly a week paused after Reuters reported that a meeting between U.S. President Donald Trump and Chinese President Xi Jinping to sign an interim trade deal might be delayed until December. But market watchers remained optimistic.
“Some of the risks surrounding the global economic outlook have decreased this week, putting upward pressure on bond yields, and the latest headlines suggest that trade negotiations are taking a two-step forward and one-step back approach,” said Daniel Lenz, a rates strategist at DZ Bank in Frankfurt.
A truce between the world’s two biggest economies would encourage investors to sell safe-haven government debt and buy stocks and other higher-yielding assets.
Yields on German 10-year bond yields rose 2 basis point to -0.31%, holding just below the -0.295% they reached in the previous session.
Comparable U.S. benchmark yields were 4 bps higher at 1.85%. Belgian, Finnish and Austrian yields were inching closer to positive territory.
China and the United States must simultaneously cancel some existing tariffs on each other’s goods for both sides to reach a phase-one trade deal, the Chinese commerce ministry said on Thursday.
China’s push to roll back more tariffs would be discussed, but it was not expected to derail progress toward an interim deal with Beijing, a senior official of the Trump administration told Reuters. The U.S. administration believes China sees a quick deal as its best chance for favourable terms.
Some positive data this week also pushed up European bond yields. Germany reported on Wednesday that industrial orders rose more than expected in September, offering a glimmer of hope for an export-powered economy hit hard by global trade tensions.
British benchmark bond yields also rose before a Bank of England meeting where officials are expected to leave interest rates unchanged.
Deutsche Bank economists expect an increasingly dovish message from central bank officials, with the risks tilted towards an interest rate cut at a January policy meeting. (Reporting by Saikat Chatterjee; editing by Larry King)