LONDON: Euro zone bond yields crept up on Wednesday, taking their cue from a rise in U.S. Treasury yields following bullish comments on the U.S. economy from Chicago's Federal Reserve president.
Regional markets were also anticipating new supply, with Germany to sell 1 billion euros of 30-year bonds, while Portugal was due to auction bonds maturing in 2021 and 2030.
U.S. Treasury yields rose after Chicago Fed President Charles Evans said on Tuesday he expects two more rate increases this year, based on the economic outlook.
That set the tone for euro zone bond markets, where 10-year bond yields were 1-2 basis points higher across the region.
Evans' comments followed hawkish remarks by Federal Reserve speakers on Monday. Atlanta Fed President Dennis Lockhart said the United States may be in line for a rate hike as soon as April, while Richmond Fed President Jeffrey Lacker said U.S. inflation is likely to accelerate in the coming years and move towards the Fed's 2-percent target.
"We've had some hawkish comments from Fed speakers and that appears to have added to the weak tone in bond markets ahead of supply today," Commerzbank interest rate strategist David Schnautz said.
There was a general note of caution in financial markets following Tuesday's attacks in Brussels, which briefly pushed German 10-year bond yields to near two-week lows.
Germany's 10-year Bund yield was up 2 basis points at 0.23 percent, having fallen to 0.18 percent on Tuesday.
"This morning there is a pull-back in bonds since there has been no follow-through on bad news," Nordea chief fixed income analyst, Jan von Gerich, said.
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