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Euro zone Bond Yields Hold below MultiMonth Highs

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LONDON, May 24 Reuters Euro zone government bond yields were a touch lower on Monday, as dovish comments at the end of last week from European Central Bank chief Christine Lagarde kept borrowing costs below recent multimonth highs.

A dearth of economic data and a holiday in parts of Europe meant trade in bond markets was generally subdued. This, alongside a weaker supply outlook for the week, meant bond markets should get some breathing space from a recent sharp selloff.

Germanys 10year Bund yield rose to twoyear highs, while Italian yields rose to their highest since September last week as investors bet stronger economic growth could tempt the ECB to slow the pace of its emergency bond buys soon.

But Lagarde said on Friday it was still too early for the ECB to discuss winding down its 1.85 trillion euro emergency bond purchase scheme, bringing calm to bond markets.

Soothing comments from Lagarde and the improving flow profile suggest that the recovery in Bunds has chances to continue, Commerzbank analysts said in a note.

Commerzbank expects bond supply volumes to moderate to about 17.5 billion euros this week.

Germanys benchmark 10year bond yield was a touch lower at 0.13, around six basis points below twoyear highs hit last week. Across the euro area, yields pulled back from last weeks highs.

Still, analysts said the direction of travel for bond yields remained higher given growing signs of a recovery from the coronavirus pandemic.

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