* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr (add details, update prices)
LONDON, March 5 (Reuters) – Eurozone bond yields edged up on Friday after Federal Reserve Chairman Jerome Powell reiterated interest rates will stay low for a long time and he does not consider the recent rise in borrowing costs in the United States as “messy.”
However, caution ahead of a European Central Bank meeting next week has kept moves under control.
Rising oil prices have also put some upward pressure on borrowing costs, helping to push a key indicator of long-term market inflation expectations in the euro area to the highest level since 2019.
Still, the overall performance of bond markets has been modest – both compared to the steep sell-off seen last week and the overnight rise in yields on US Treasuries.
“Headwinds for US Treasuries remain strong, but euro bond bears appear to be getting less aggressive as the ECB meeting approaches,” said Michael Leister, head of interest rate strategy at the Commerzbank.
Eurozone yields rose only modestly, with bond prices outperforming U.S. Treasuries, remaining below nearly a year highs reached last week when global bond markets came under severe pressure on sale.
Germany’s benchmark 10-year bond yield was up 1 basis point (bps) late in the session to -0.30% at 3:23 p.m. GMT after rising sharply earlier in the session.
US employment data in February was more than twice as strong as expected, briefly pushing Germany’s 10-year yield up more than 3bp on the day to -0.273% as it followed a larger rise in yields on US Treasuries.
The euro zone’s five-year and five-year breakeven inflation rate, an indicator of market inflation expectations, reached its highest level since early 2019 at nearly 1.44%.
This coincided with a more than 2% rise in oil prices to their highest level in nearly 14 months after the Organization of the Petroleum Exporting Countries and its allies agreed not to increase supply in April.
Still, eurozone bond yields looked set to end the week lower, enjoying a breather from the recent sell-off.
German Bund yields were about to end the week down around 4bp – the biggest weekly drop since December and the break of four straight weeks of increases. When bond yields fall, the price goes up.
French and Dutch 10-year bond yields also looked set to break with four consecutive weeks of increases.
A series of comments from ECB officials expressing concern over the pace of rising bond yields helped calm debt markets.
Investors are now looking to the ECB to shore up its concerns about the action – including an acceleration in the pace of asset purchases under the ECB’s emergency bond purchase program to contain rising prices. borrowing costs.
Elsewhere, Moody’s is expected to review Spain’s credit rating later Friday.
Reporting by Dhara Ranasinghe, additional reporting by Yoruk Bahceli; Editing by Elaine Hardcastle and Mark Potter