July 3, 2020 / 7:50 AM / a month ago

German Bunds on course for worst week in a month

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Yoruk Bahceli

AMSTERDAM, July 3 (Reuters) - Bunds were set to close their worst week in a month on Friday but analysts expect pressure to abate given uncertainty around the spread of the coronavirus and central bank support.

10-year German yields are up 5 basis points this week, set for their biggest weekly rise since the week ending June 5 . They briefly rose to three-week highs on Thursday after a number of economic data releases surprised to the upside earlier in the week, although analysts said technical factors were key.

But Bunds managed to retrace some losses, and yields fell later on Thursday despite employment data proving better than expected in the euro zone and the United States, where a record number of jobs were created in June, buoying U.S. equities. A boost to investor risk appetite would usually hurt safe-haven bonds.

“It is quite telling that core government bond yields did not manage to move higher on a day when a surprisingly positive U.S. labor market report was released,” UniCredit analysts told clients.

“This somehow underscores our firmly held view that UST (US Treasury) and Bund yields will have a hard time finding a way up over the next few weeks.”

ING analysts expect 10-year German yields to fall towards -0.50% in the short-term, citing the number of new coronavirus infections in the United States.

The United States reported more than 55,000 new COVID-19 cases on Thursday, a new daily global record, as infections rose in most states.

It is a light data calendar on Friday, with the only major reading coming from final euro zone business activity data.

Bond yields fell in early Friday trade, with Germany’s 10-year yield down 1 basis point to -0.44%, and Italy’s 10-year yield down 3 basis points at 1.26%, its lowest since late March. (Reporting by Yoruk Bahceli; Editing by Pravin Char)

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