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Euro zone bond yields steady, set for biggest weekly rise in a month


Euro zone bond yields steady, set for biggest weekly rise in a month

Euro zone government bond yields were little changed on Friday, but set for their biggest weekly rise in a month, with investors continuing to take their cue from U.S.-China trade talks. Discussions are "moving right along", U.S. President Donald Trump said on Thursday, striking an upbeat tone even as Chinese officials held fast to their line that existing tariffs must come off as part of an interim deal to de-escalate the 17-month trade war between the world's two biggest economies.

The ups and downs of negotiations and some mixed signals from Trump have set the tone for bond markets in recent weeks. The overall positive take on the talks, as well as signs that the euro zone economy's slowdown may be bottoming out, have pushed bond yields up from record lows hit three months ago.

Germany's 10-year Bund yield, little changed on Friday at -0.29%, is up 6 basis points this week and set for its biggest weekly jump in a month. U.S. and Italian bond yields are also set for their biggest weekly rises in a month.

"The trade news is still the number one dominant factor and putting bonds on the back foot as the tone is more constructive overnight," Christoph Rieger, rate strategist at Commerzbank, said. "There's also speculation about changes in fiscal spending in Germany with the SPD congress getting under way - whether we get that remains to be seen but the headlines do get attention."

A congress of Germany's Social Democrats (SPD) starts on Friday. Two leftist critics of the coalition with Angela Merkel's conservatives last weekend won a leadership ballot of the SPD, fuelling talk that they will push for increased spending by the German state.

Pressure on fiscally prudent Germany to spend more and lift growth in the euro zone's biggest economy has ramped up this year. Analysts also noted a rise in Japanese government bond yields, which they attributed to a $122 billion stimulus package approved by Japan's cabinet this week to support weak growth.

The yield on Japan's benchmark 10-year bond rose to as high as -0.015%, nearing the 0% mark for the first since early 2019 . There was little immediate reaction to data showing German industrial output fell sharply in October, with analysts saying the bigger focus was Friday's U.S. jobs numbers, a closely-followed gauge of U.S. economic health.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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