LONDON: Euro zone bond yields mostly pushed higher on Thursday as investors positioned for what may be a strong non-farm payrolls report after robust private sector data pointed to a strong recovery in the US labour market.
Economists expect US employers to have added 212,000 jobs in June, down slightly from 217,000 in May, according to a Reuters poll. The data will be released on Thursday at 1230 GMT because Friday is a holiday in the United States.
Some market participants were betting on a higher figure after Wednesday's ADP National Employment Report showed companies hired 281,000 workers in June, well above the 200,000 forecast.
German 10-year yields, the benchmark for the euro zone, rose 1.5 basis points to 1.30 percent, extending Wednesday's rebound from near historic lows. Other euro zone bond yields were 1-3 bps higher, though traders said activity was tempered by caution ahead of the European Central Bank's monetary policy decision later in the day.
"Clearly after yesterday's ADP report the market sold off and yields pushed higher and this persists this morning and the market is gradually expecting a stronger NFP," said Patrick Jacq, a bond strategist at BNP Paribas in Paris.
"We have the ECB press conference at the same time ... so there could be more volatility in the market than a clear bias."
The US data will be released just as ECB President Mario Draghi starts his post-meeting press conference.
READING DRAGHI
The ECB is expected to hold off on further monetary stimulus measures after cutting interest rates to record lows last month and announcing 400 billion euros of new loans for banks.
Markets will be looking for details of the four-year loan scheme, which will be contingent on banks lending to companies and households rather than buying government bonds as they mostly did with similar crisis loans offered in 2011-2012.
Investors will also parse Draghi's comments to see how far back policymakers have pushed the possibility of asset purchases to support the euro zone's anaemic economic recovery.
"If his words are interpreted by the market as suggesting that QE is further away than the market is expecting, it could have some impact," said Elwin de Groot, senior market economist at Rabobank.
Among peripheral euro zone bonds, Spanish yields were a touch higher as investors absorbed up to 4.5 billion euros of bonds, including new five-year paper.
While demand for the Spanish bonds was less stellar than at auctions so far this year, analysts said this signalled no weakening in investor demand for peripheral bonds which have driven their borrowing costs to record lows.
"Certainly, the backdrop of key data, event risk in the form of US labour data and the ECB policy announcement is less than conducive for a strong uptake this morning," Rabobank strategists said in a note.
"As indicated by yesterday's strongly oversubscribed 10-year dollar syndication out of Portugal, though, we would not take this as any indication peripheral debt markets are beginning to lose their lustre."
Portugal raised $4.5 billion on Wednesday in its first dollar bond sale since March 2010 as it sought to build up cash buffers to fund near-term debt repayments ahead of schedule.
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