UPDATE 2-German bond yields break 3-day falling streak as trade talks watched

Benchmark German bond yields ended a three-day falling streak and nudged higher on Thursday as investors took profits after a rally, although concern over whether the United States and China would sign a trade deal this year capped the spike in yields. China has invited U.S. trade negotiators for a new round of face-to-face talks in Beijing amid continued efforts to strike at least a limited deal, the Wall Street Journal reported on Thursday, citing unnamed sources.

Although waning expectations of a trade deal have delivered a body blow to risky assets worldwide, the perceived safe-haven bond yields rose across the board. "Frankly this move higher in bond yields is a bit puzzling as we think the prospects of a trade deal have receded substantially, and we should see another leg down in the global bond rally," said Sergio Capaldi, a fixed-income strategist at Intesa Sanpaolo.

The completion of phase one of the trade deal may slide into next year, trade experts and people close to the White House said, as Beijing presses for more extensive tariff rollbacks and the United States counters with heightened demands of its own. Yields were broadly higher across the euro-area following slightly higher U.S. Treasury yields overnight.

German 10-year bond yields, widely seen as a benchmark in the euro area, rose nearly 2 bps to -0.3340%, rising above a three-week low of -0.3840% hit on Wednesday. An overnight rise in the ESTR rate, the eurozone's new benchmark interest rate, also weighed on sentiment.

Wednesday's spike in the ESTR rate was the biggest daily jump in the benchmark money market interest rate since it was launched by the European Central Bank at the start of October. Global benchmark bond yields took the Fed's release of the minutes of the end-October policy meeting in their stride. The minutes showed an increasingly divided U.S. central bank that decided to hit pause in its easing cycle following a rate cut at the meeting.

A eurozone consumer confidence index rose to -7.2 this month, figures released earlier showed. Economists polled by Reuters had expected a rise to -7.3. Markets also shrugged off minutes from the European Central Bank's policy meeting on Oct 23-24. They showed rate-setters had agreed to allow more time for a stimulus package announced a month earlier to work its way through to the economy.