US bond selloff ups borrowing costs higher in eurozone

LONDON - Reuters

Bond yields in the euro area rose yesterday as a selloff in U.S. Treasuries gathered pace, although a looming European Central Bank meeting injected a note of caution into regional debt markets.

The benchmark U.S. 10-year Treasury yield pushed further past 3 percent in early European trade, having broken the key level on April 24 as a strong U.S. economy stoked expectations that a three-decade long bond-bull market is nearing an end.

Rising benchmark Treasury yields, used as a global yardstick for interest rates on everything from home loans to corporate bonds, dragged euro zone equivalents higher once more.

But analysts said they expected any selling in Europe to be limited a day ahead of the ECB meeting.

Germany’s benchmark 10-year bond yield rose 1.5 basis points to 0.65 percent, close to six-week peaks hit a day earlier. Other euro zone bond yields were 1-2 bps higher on the day.

The ECB is not expected to make any significant changes to its monetary policy outlook on April 27 but its comments will be followed closely for further guidance on the timing of a scaling-back of massive monetary stimulus.

In particular focus is what ECB chief Mario Draghi has to say about a recent softening in euro zone economic data, which has prompted investors to push back expectations for a rate rise further into 20