LONDON: German Bund yields hit a five-week high on Monday, reversing early falls, as investors anticipated a new bond issue from the European Stability Mechanism (ESM), the euro zone's crisis resolution fund.
The ESM on Monday mandated banks for a 16-year benchmark due on 3 May 2032, IFR reported.
"Reports that banks are syndicating a 16-year benchmark for ESM is pushing bond yields higher," said Mizuho strategist Peter Chatwell. "But markets are thin and there doesn't appear to a fundamental driver for yields to push higher."
Germany's 10-year Bund yield rose more than 3 basis points to 0.28 percent. Yields across the euro zone were 1-5 bps higher.
Earlier, bond yields fell after a survey showing German business morale unexpectedly fell in April reinforced expectations that the European Central Bank's ultra-loose monetary policy would stay in place for some time.
The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, inched down to 106.6 in April from 106.7 in March. The reading compared with the Reuters consensus forecast for a rise to 107.0.
Bund yields ended Friday with their biggest weekly rise since last December after a rebound in oil prices and a wait-and-see message from the European Central Bank at its policy meeting on Thursday.
Focus turned to the U.S. Federal Reserve, which meets on Wednesday, and a Bank of Japan meeting on Thursday.
There is talk that Japan could push deeper into negative interest rate territory, while there is intense interest in where the Fed stands on another rate hike.
Bloomberg reported on Friday that the Bank of Japan is considering further easing monetary policy by applying negative rates to its lending for financial institutions.
"It seems like there are some expectations for BOJ easing come Thursday," said Rabobank fixed income strategist Lyn Graham-Taylor. "It is interesting because the last time the BOJ eased, it was seen as a worrying sign for global markets."
Elsewhere, Austrian government bonds showed little immediate reaction to Sunday's presidential election.
Austria's far-right won more than a third of the vote in the election and will face an independent in next month's run-off, squeezing out the country's two main parties from the post for the first time.
"The result is another instance of an anti-establishment, anti-EU party winning support; this may be a focus for investors," UBS analysts said in a note.
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