* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Recasts, adds details, updates prices)
April 28 (Reuters) – German 10-year bond yields rose to their highest since late February on Wednesday, catching up with a jump in Treasury yields ahead of the close of the U.S. Federal Reserve’s policy meeting later in the session.
No major policy changes are expected at the meeting, but investors are awaiting Fed Chairman Jerome Powell’s comments for any signs that the bank may start talking about tapering its bond buying. The Fed has promised it will continue purchases at their current pace until “substantial further progress” is made in an economic recovery from the pandemic.
Benchmark Treasury yields have stabilized in April after suffering their worst quarterly performance since 2009, when expectations that a vast U.S. fiscal stimulus would reignite economic growth and inflation pushed yields, which move inversely with prices, sharply higher.
But the stabilization has started to lose steam this week, with 10-year yields up 8 basis points over the last two sessions.
German bonds, which are closely correlated with Treasuries, caught up with the Treasury sell-off on Wednesday.
Germany’s 10-year yield, the benchmark for the euro area, rose nearly 5 bps to its highest since late February at -0.203%.
Italy’s 10-year bond yield rose broke another seven-month high at 0.864%, though the sell-off in German bonds helped bring down the closely watched risk premium Italy pays on top of Germany down to around 106 bps. It had touched 108 bps on Tuesday, the highest since early February.
Jens Peter Sorensen, chief analyst at Danske Bank, said the negative open to the European bond market was expected, given Treasury yields mostly rose following the European close on Tuesday. Bond yields rise when prices fall.
“The upward move in U.S. Treasury yields is driven by the expectations for a more upbeat Federal Reserve committee as well as the solid rise in the consumer confidence,” Sorensen said, referring to U.S. data for April that jumped to a 14-month high on Tuesday.
In contrast, German consumer morale deteriorated unexpectedly heading into May, given rising COVID-19 infections and a re-tightening of restrictions in many areas of Europe’s largest economy.
In the primary market, Germany raised 2.132 billion euros from the re-opening of a 15-year bond. (Reporting by Yoruk Bahceli; Editing by Raju Gopalakrishnan, William Maclean)
