German 10-year bond yield hits one-month high

The yield on the 10-year German Bund, the benchmark for the euro zone rose as much as 4.6 basis points (bp), to 2.33% its most since Jan. 5, just edging past its previous peak hit last week ahead of a market-moving European Central Bank meeting. Bond yields move inversely to prices.

Germany's 10 year bond yield hit a one month high on Tuesday, ahead of closely-watched remarks from European and U.S. policymakers, as last week's bond rally proved short lived. The yield on the 10-year German Bund, the benchmark for the euro zone rose as much as 4.6 basis points (bp), to 2.33% its most since Jan. 5, just edging past its previous peak hit last week ahead of a market-moving European Central Bank meeting.

Bond yields move inversely to prices. Italy's 10-year yield, meanwhile, was up 3 bps at 4.21%, leaving the closely-watched gap between the two at 189 bps, little changed on the day.

European bonds have had a busy few trading days. The German 10-year yield was 2.291% at last Wednesday's close, before dropping as low as 2.042% the next day after markets took a dovish message from a European Central Bank (ECB) meeting. It then rebounded sharply after ECB hawks emphasised on more rate increases and as surprisingly strong U.S. jobs data raised bets of more rate hikes by the Federal Reserve.

ING analysts said markets will be looking to public appearances from ECB board member Isabel Schnabel and Fed Chair Jerome Powell, who they say could try to "set the record straight after dramatic market reaction to last week's policy meetings". Globally, Powell's remarks are being particularly closely watched as it will be his first chance to comment on Friday's seemingly blockbuster U.S. employment report for January.

"Helped by a bumper jobs report in the US, and hawkish post-meeting ECB comments, we would argue that both Schnabel and Powell face an uphill struggle to move yields up much further," the analysts said in a client note. "10-year Bund yields for instance are 25bp off their post-ECB meeting trough already, to a level we would call low but not strikingly so. The same goes for 10Y Treasury yields."

A bond's yield moves inversely to its price. Investors are also watching bond auctions from several European issuers, including the Netherlands and Germany.

The German two-year yield was up 1 bp at 2.61%, while Italian two-year yields rose 3 bps to 3.19%.

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