Eurozone government bond yields mostly rose on the back of strong economic data and optimism about raising the US debt ceiling.
German 10-year bond yields increased by 2.9 basis points to 2.442%, while the yield on 2-year bonds increased by 0.7 basis points to 2.799%. Since the beginning of the week, 10-year bond yields have increased by more than 16 basis points, which is the largest increase since mid-April. The yield on France's 10-year bonds fell by 0.3 basis points to 3.035%, while the yield on Italy's 10-year bonds rose by 1.1 basis points to 4.32%. The closely watched gap between Italian and German 10-year yields is now 188 basis points. Yields are still well below levels at the start of March, when the German 10-year stood at a more than 11-year high of 2.77%.
Investors bought government bonds, reducing their yields, due to concerns about the US debt ceiling. Nevertheless, the increased hopes for a deal improved the mood in the markets. Meanwhile, strong economic data helped boost bond yields and led some central bank policymakers to advocate further rate hikes. Last week, Joachim Nagel, President of the Deutsche Bundesbank, said that the May interest rate hike will not be the last.
Later today, the focus of investors' attention will be statements by Fed Chair Jerome Powell, ECB President Christine Lagarde and ECB policymaker Isabel Schnabel.