* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, June 14 (Reuters) - Italy's 10-year sovereign
borrowing costs edged up but stayed near multi-week lows on
Monday as comments from the ECB chief supported the view that
there is no hurry to taper aggressive emergency stimulus.
European Central Bank President Christine Lagarde told
Politico that while the euro zone economy is at a turning point,
its recovery must be firm and sustainable before the central
bank can debate clawing back emergency support.
The ECB agreed last week to maintain an elevated pace of
bond purchases to keep borrowing costs ultra-low, and
policymakers did not entertain questions about tapering support,
even as the economy rebounds from the COVID-19 shock.
This backdrop has supported euro zone bond markets in recent
days, allowing yields to fall further.
Italy, one of the biggest beneficiaries of ECB bond-buying,
has led the way. Its 10-year bond yield touched 0.74% on Monday
, its lowest level in almost eight weeks, before
recovering some ground. By 1507 GMT it was at 0.771%, up 2.3
basis points (bps) on the day after falling 13 bps last week.
"Lagarde's comments (this and last week) support stability
in rates," said ING senior rates strategist Antoine Bouvet.
"This should in theory attract more demand into carry trades
(in particular high-yielding bonds) but I think this is largely
priced in," he said, adding that bond markets could become more
vulnerable to a pullback around bond issuance.
Most 10-year bond yields in the euro area edged up just
slightly with Tuesday's two-day meeting of the U.S. Federal
Reserve providing another reason for subdued trading across
Germany's benchmark 10-year bond yield was up 1.4 bps on the
day at -0.254%. It hit -0.287% on Friday - its
lowest since April. Greece's 5-year bond yield fell
below zero to -0.012% at one point - its lowest since Nov. 13.
Market focus meanwhile turned to the European Union, which
began selling the first bond backing its 800 billion euro
recovery fund that would make it one of the biggest debt issuers
in the world.
This first sale should be completed on Tuesday and raise 10
"The key point is that new EU bonds will provide investors
with a liquid alternative," said Lidia Treiber, director,
research at WisdomTree Asset Management. "This moment sets a
precedent as an additional tool that the EU and the ECB has."
($1 = 0.8261 euros)
(Reporting by Dhara Ranasinghe and Danilo Masoni; Editing by
Emelia Sithole-Matarise/Mark Heinrich, William Maclean)