Euro zone bond yields edged up, US politics in focus

MILAN: Euro zone government bond yields edged higher on Thursday as a jump in U.S. Treasuries yields spilled over into Europe on expectations of more government spending after runoff elections in Georgia gave Democrats control of the Senate.

The rise in U.S. Treasuries yields was tempered last night as hundreds of President Donald Trump's supporters stormed the U.S. Capitol on Wednesday in a stunning bid to overturn his election defeat.

But it quickly became clear that objections from pro-Trump Republican lawmakers to Joe Biden's victory in battleground states would be rejected overwhelmingly, including by most Republicans.

Germany's 10-year Bund yield were up 0.1 basis points at -0.55%.

"Euro zone bond markets continue to post a strong start to 2021," Commerzbank analysts said. "Regarding Bunds/outright valuations, the transatlantic spread and U.S. dollar break-evens continue to absorb the bulk of U.S. reflation dynamics."

Italian 10-year government bond yields were up 1 basis point at 0.551%, with the spread between German and Italian yields at 109.

"In addition, spreads continue to trade with a tightening bias," Commerzbank told clients.

Italy got strong orders for its syndicated 15-year BTP bond issue on Wednesday, taking advantage of a solid market for euro zone borrowers as investors bet on aid from the European Central Bank and the European Union's Recovery Fund.

Euro zone macro data is due at 1000 GMT, including economic sentiment and consumer prices.

Citi economists expect a "meaningful rebound in today's economic sentiment for December."