Euro zone yields rise as business surveys show recession easing

Euro zone bond yields rose as business surveys from France and Germany suggested the continent's two largest economies are recovering from the depths of the COVID-19 crisis as they come out of lockdown. Euro zone purchasing managers' indices for the month of June are expected to show a further contraction in manufacturing and services across the single currency bloc.

Euro zone bond yields rose as business surveys from France and Germany suggested the continent's two largest economies are recovering from the depths of the COVID-19 crisis as they come out of lockdown.

Euro zone purchasing managers' indices for the month of June are expected to show a further contraction in manufacturing and services across the single currency bloc. But the fall is slated to be far less dramatic than the same readings a month ago. A Reuters poll of analysts shows expectations are for euro zone manufacturing and services PMIs -- due at 0900 GMT -- to print between 40-45, where 50 is the line that separates expansion from contraction.

Last month those readings all came in the 30s. "For now as lockdowns are eased, the very strong influence that has on the data in PMIs I think feeds into the risk on mood," said Richard McGuire, head of rates strategy at Rabobank.

"The market only have eyes for the V-shaped recovery and the PMIs feed into that," he said. The corresponding French and German surveys already showed a business recession easing in the bloc's two largest economies.

Safe haven German 10-year bond yields rose 2 basis points on this news to -0.45% and moved further away from a near one-month high hit overnight. Other high-grade euro zone bond yields were also higher on the day.,

German yields had dropped to their lowest level since May 26 overnight at -0.492%, tracking U.S. Treasury yields lower, on renewed concerns about trade relations between the United States and China. White House trade adviser Peter Navarro said on Monday the trade deal with China is "over", linking the breakdown in part to Washington's anger over Beijing not sounding the alarm earlier about the coronavirus outbreak.

Business surveys for the UK and the United States are also due out later in the day. In terms of new supply, Germany is set to sell 5 billion euros of two-year "Schatz" bonds while the Netherlands will reopen debt maturing in January 2040 to raise 1.5 billion euros.