Euro Zone Government Bond Yields Edge up; U.S. Fiscal Stimulus Talks in Focus

Core euro zone government bond yields rose in early trading on Tuesday, edging up by a couple of basis points, as global market sentiment remained upbeat about U.S. fiscal stimulus.

After Asian shares rose overnight, European equity indexes opened higher, with market participants optimistic before negotiations between U.S. President Joe Biden and Republican senators on a new COVID19 support bill.

The tone in global market strikes as us as more upbeat than last week, wrote ING rates strategists in a note to clients. The focus on US fiscal stimulus could add upside to global yields, and help resume the USDEUR rates widening trend.

The benchmark German 10year Bund yield was up around two basis points at 0.4980 at 0817 GMT, having risen by around 6 bps in the past seven days.

The spread between the German benchmark yield and the 10year U.S. Treasury yield was at 159 basis points .

In Italy, talks aimed at reviving the collapsed ruling coalition were stuck on policy issues, political sources said.

Riskier Italian bonds yields edged higher, with the 10year up around 1 basis point at 0.636.

Data on Monday showed that the European Central Bank kept its purchases of Italian government bonds steady in the last two months, even as the country went through a political crisis that briefly pushed up its borrowing costs.

ECB bondbuying under the Pandemic Emergency Purchase Programme PEPP was lower than it was the week before.

The reduction in the pace of purchases is perhaps…

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