* 30-year bond yields lead rise in bloc’s borrowing costs
* Easing in U.S./Mexico tensions, firmer equities weigh
* But demand for bonds still strong
* German Bund yield remains close to record low
By Dhara Ranasinghe
LONDON, June 11 (Reuters) - Longer-dated euro zone government bonds led a selloff in the bloc on Tuesday, as a pick up in risk sentiment globally took the shine off a stellar rally in fixed income.
Thirty-year bond yields in Germany and France were up as much as 8 basis points in early trade .
Worries about a bitter trade war and recession risks have pushed investors into even longer-dated bonds in recent weeks.
But a U.S. decision to hold off from imposing import tariffs on Mexico at the end of last week has brought some relief to world markets, lifting stocks.
“Overall, in these last couple of sessions when yields have dropped to new lows but stocks have rallied, bond investors have taken the opportunity to take profits on decent long positions,” said John Davies, G10 rates strategist at Standard Chartered.
The rise in euro zone bond yields with maturities out to 10 years was relatively limited, highlighting that pessimism remains entrenched and the demand for holding fixed income remains strong. When a bond’s yield rises, its price falls.
U.S. President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with China’s president at a Group of 20 summit later this month.
An escalation in trade tensions has been the key driver behind sliding U.S. and European bond yields in the past month.
Germany’s 10-year bond yield was up 3 bps at minus 0.23% — still just 3 bps away from last week’s record lows.
Dutch 10-year bond yields, while 4 bps higher at minus 0.05% , remained in negative territory.
“You have to be long globally on fixed income,” said Said Haidar, chief investment officer at Haidar Capital. “That move is not done yet. The global data just keeps on going down.”
Elsewhere, Italian bonds benefited from the slightly more positive tone in word markets, with 10-year bond yields down almost 2 bps at 2.34%.
Focus remained on domestic politics.
Italy’s coalition leaders agreed on the need to avert a European Union disciplinary action over Rome’s worsening public finances at a meeting with Prime Minister Giuseppe Conte late on Monday, the PM’s office said. (Reporting by Dhara Ranasinghe; Editing by Catherine Evans)