MILAN: Euro zone bond yields clung to recent peaks on Monday, with benchmark German government borrowing costs holding near 2-1/2-year highs, as expectations for Federal Reserve policy tightening kept global debt markets on edge.
Euro area bonds sold off heavily last week after minutes from the Fed's December meeting showed some policymakers wanted to move even faster to tighten policy.
A strong US December inflation report, due on Wednesday, could raise the pressure for the Fed to rise rates as soon as March.
A Reuters poll predicts consumer prices have risen 7% year-on-year last month, up from 6.8% in November.
"Bond yields are likely to continue to be driven by investor expectations on the start, the speed and the length of the Fed's rate-hike cycle and possible quantitative tightening scenarios," UniCredit strategists wrote in a note to clients.
Investors are also digesting euro zone inflation numbers, following data showing December consumer prices at another record high.
European Central Bank board member Isabel Schnabel said on Saturday rising energy prices may force the ECB to stop "looking through" high inflation and act to temper price growth, particularly if the green transition proves inflationary.
By 0800 GMT, Germany's 10-year yield was almost flat on the day at -0.032%, having risen as far as -0.031% last week, its highest since May 2019.
Italy's 10-year yield was up 1.2 bp to 1.33%, a new high since July 2020.
US 10-year Treasury yields continued trending up, rising 3.6 bps to a new two-year high.
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