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German bond yields hover near ECB deposit rate

·2-min read

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr

By Yoruk Bahceli

Aug 5 (Reuters) - Euro zone bond yields sought direction in quiet trade on Thursday ahead of a key U.S. jobs data reading due on Friday.

Government bond yields on both sides of the Atlantic have continued falling in the first week of the month after a plunge in July that gave them their best performances since the start of the pandemic and earlier. Bond yields move inversely with prices.

Euro area government bond yields have moved in tandem with U.S. Treasury yields in recent sessions, as a potential cut to Treasury issuance later in the year and lower-than expected private employment and manufacturing growth data helped keep U.S. yields near lows.

With little in the way of data to move euro area markets on Thursday, Germany's 10-year yield, the benchmark for the bloc, was unchanged at -0.496% by 0703 GMT after dipping below -0.50%, the European Central Bank's policy rate, for the first time since January on Wednesday.

"Bunds look set to remain supported even though markets should continue to struggle at the -0.50% level in 10-year yields as signalled by yesterday's late U.S.-driven sell-off," said Michael Leister, head of interest rates strategy at Commerzbank.

Data on Thursday showed German industrial orders rose more than expected in June after a drop in May, but material shortages continue to weigh on production. It however had little impact on bond markets.

Focus across bond markets was on the Bank of England's policy announcement later on Thursday, where it is expected to keep support for Britain's economy running at full speed. However, the central bank might also start to lay out its plan for how it will eventually reverse its stimulus.

In auctions, France will raise up to 7.5 billion euros from the reopening of bonds due 2031, 2032 and 2034. Spain will raise up to 5 billion euros from bonds due 2024, 2026 and 2031, and up to 750 million euros from an inflation-linked bond due 2030.

Bond markets are eyeing U.S. non-farm payrolls data due on Friday that may be the next catalyst to move U.S. Treasuries, which euro area government bonds will likely follow. (Reporting by Yoruk Bahceli; Editing by Giles Elgood)

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