* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr (add details, update prices)
LONDON, April 14 (Reuters) – German government bond yields hit two-week highs on Wednesday evening, reversing an earlier rally when manufacturing and industrial data from the eurozone and Japan signaled hurdles as l global economy is battling the coronavirus pandemic.
Eurozone industrial production fell in February after increasing in January, and Japanese machinery orders fell the most in about a year,
Eurozone bond yields – which have followed higher US Treasury yields in hopes of a strong economic recovery later this year and higher inflation – initially fell.
But that reversed and the yield on German 10-year bonds, the benchmark of the single currency bloc, hit its highest level in more than two weeks on Wednesday night at -0.264%, above levels reached on Tuesday when ‘a wave of bond sales put pressure on the market. .
Yields on Treasuries also rose, with a number of Federal Reserve speakers expected Wednesday following inflation data slightly exceeding expectations.
Dallas Federal Reserve Chairman Robert Kaplan reiterated his view that the Fed should start withdrawing support for the economy sooner than most colleagues think.]
“The big picture is about rising yields,” said Antoine Bouvet, ING rate strategist.
“A lot of people think that a strong recovery is in the price, but it depends on the communication from the Fed – the start of the reduction debate must be this year given the potential strength of the recovery.”
The eurozone economy still rests on the “two crutches” of monetary and fiscal stimulus, and these cannot be removed until a full recovery, said European Central Bank President Christine Lagarde.
Some policymakers have expressed hope that the ECB could start cutting bond purchases in the third quarter as the pace of COVID-19 vaccinations picks up.
In the primary market, Ireland has hired a syndicate of banks to sell a 20-year bond, which will raise 2-3 billion euros according to a market source.
Governments resumed issuing longer-dated bonds after those issues ended with the bond sell-off in February, with Austria and Spain selling 50-year and 15-year bonds respectively on Tuesday.
The European Union also unveiled on Wednesday its plan to borrow 800 billion euros for the stimulus fund, which will raise around 150 billion euros per year from the end of this year.
Reporting by Abhinav Ramnarayan, additional reporting by Yoruk Bahceli; Editing by Ana Nicolaci da Costa, Kirsten Donovan and John Stonestreet