Euro zone bond yields steady ahead of PMIs

• Bond yields rose sharply late last week on signs of a first phase trade deal between the United States and China.
• The United States also agreed to halve the tariff rate, to 7.5pc, on $120 billion worth of Chinese goods.
• The agreement suspended a threatened round of U.S. tariffs on a $160 billion list of Chinese imports.

LONDON: Euro zone bond yields ticked higher in early Monday trade, ahead of manufacturing and services data that will provide a hint to how the bloc's economies will close the year.

Bond yields rose sharply late last week on signs of a first phase trade deal between the United States and China, and clarity on Britain's exit from the European Union following a Conservative victory in a general election.

But the rises were eventually erased as caution prevailed regarding the next phase of a U.S.-China trade deal and British trade negotiations with the EU.

The "phase one" U.S.-China trade deal will nearly double U.S. exports to China over the next two years and is "totally done" despite the need for translation and revisions to its text, U.S. Trade Representative Robert Lighthizer said on Sunday.

The agreement suspended a threatened round of U.S. tariffs on a $160 billion list of Chinese imports that was scheduled to take effect on Sunday.

The United States also agreed to halve the tariff rate, to 7.5pc, on $120 billion worth of Chinese goods.

"The threat of the trade war is still there... There's still a lot to be negotiated from this point and we've avoided an increase in tariffs and the troubles that would cause but we haven't really made any progress," said Mizuho's head of rates strategy Peter Chatwell.

"There's a range of issues that are still on the table that are still yet to be negotiated; that will happen over the course of next year."

Most 10-year euro zone bond yields were around 1 bps higher in early trade, with Germany's 10-year bund yield at -0.29pc , off a six-month high of -0.217pc hit on Friday.

Attention turns on Monday to "flash", or first estimate, purchasing managers' index (PMI) figures, which will give an initial estimate of how euro zone economies have fared in December.

German figures are due at 0830 GMT. A Reuters poll expects modest service sector growth from November, while manufacturing is expected to remain in deep contraction despite an improving performance since September.

Euro zone figures will follow at 0900 GMT, where similar figures are expected.

The figures will provide a clue to how economies have fared in the fourth quarter, after the region's leading economy Germany escaped an expected recession in the third quarter thanks to consumer spending.