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Eurozone bond yields rise amid heightened global optimism

(Clarifies reason for the rise in the headline)

Por dhara ranasinghe

LONDON, Apr 26 (Reuters) – Eurozone bond yields rose on Monday, reflecting more positive sentiment in global markets and a growing sense that the worst may be behind the region’s economy, very much behind it. affected by the coronavirus in the last twelve months.

Most of the 10-year bond yields of the currency bloc were 1 to 2 basis points higher than the previous day, while US Treasury yields also rose slightly.

Although bond markets have stabilized following the US-led bond sale earlier this year, improving economic indicators and increased COVID-19 vaccination have begun to put some upward pressure on borrowing costs in the euro area.

In recent weeks there has been an acceleration of vaccination in Europe, and the large countries of the European Union are applying vaccines at a similar rate to that of the United Kingdom. The EU should meet its target of vaccinating 70% of adults by the summer, according to NatWest Markets.

The yield on German 10-year bonds in recent trading rose 2 basis points from the previous day, to -0.24%, not far from the seven-week highs reached last week. The 30-year bond yield, at 0.31%, was approaching the one-year highs reached last week.

Andreas Billmeier, a European economist at Western Asset, said the uptrend in European bond yields should be gradual and fit the bigger picture of a recovering economy.

“If you eliminate the dynamics of US rates of return, what there is is an economic recovery and that should go hand in hand with higher rates.”

“You have to keep in mind that the ECB (European Central Bank) did not say a peep when yields rose between December and February, but once the volatility from the United States kicked in.”

The ECB stepped up the pace of its bond purchases in March to contain rising borrowing costs, driven by US Treasuries.

The focus was on Italy, which has reached an agreement with the European Commission on its Recovery Plan, after days of intense talks, paving the way to present it to Brussels at the end of April.

“The positivism stemming from the good distribution of EU funds” has not yet fully translated into the BTP / Bund spread, and there is still room for a major adjustment there, “Mizuho said in a note.

The 10-year yield difference between Italy and Germany was 103 basis points.

Late on Friday, S&P raised Greece’s rating by one notch, to “BB,” citing hopes for a rapid improvement in the country’s economic and budgetary performance as the adverse effects of the COVID-19 pandemic diminish. .

The yield on Greek 10-year bonds rose by around 1 basis point to 0.90%, in line with other euro zone countries.

(Information from Dhara Ranasinghe; edited by Kirsten Donovan; translated by Flora Gómez at the Gdansk newsroom)

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