Euro zone bond yields rise, central banks in focus

Germany's benchmark 10-year bond yield on Thursday crept towards six-month highs touched last week, with focus turning to this session's central bank meetings. In particular, the spotlight was on Sweden.

Its central bank, the Riksbank, is expected to lift its repo rate to zero from -0.25%, as worries about the unwanted side-effects of such a policy trump signs of slower growth at home and a shaky global outlook. That would make it the first central bank in the world to have adopted negative interest rates and then dispensed with them.

The European Central Bank, Denmark, and Switzerland had already gone sub-zero, and Japan and Hungary have since joined the club. "Today's Riksbank hike is widely expected but the successful exit from negative rates could still fuel speculation that the ECB should also consider policy normalization," said Christoph Rieger, head of rates at Commerzbank.

The Bank of Japan on Thursday suggested it is in no hurry to boost stimulus, and the Bank of England meets later in the day. In early trade, most 10-year bond yield across the single currency bloc was 1-2 basis points higher on the day.

Germany's benchmark 10-year bond yield rose to -0.23%, moving closer to a six-month high around -0.22% touched briefly on Friday after a resounding election win for Britain's Conservative Party eased uncertainty over Brexit. Germany is expected to release its 2020 bond auction calendar later in the session, with focus has seen falling on plans to issue its first green bonds.

The German government plans to tap into the booming market of sustainable finance by issuing its first "green bond" in the second half of next year, three people familiar with the matter told Reuters on Wednesday. Bond markets, in general, shrugged off the impeachment of U.S. President Donald Trump on Wednesday, with U.S. Treasury yields pushed up positive signs on the economy.