* Euro zone yields spike as focus shifts from politics to
* Euro firms on Reuters reports of ECB tweak in June
* ECB meets Thursday but no changes expected
By John Geddie and Patrick Graham
LONDON, April 25 Euro zone government bond
yields rose broadly and the euro firmed on Tuesday after Reuters
reported that European Central Bank policymakers see scope for
sending a small signal in June towards reducing monetary
Three sources on and close to the bank's Governing Council
told Reuters that with the threat of a run-off between two
eurosceptic candidates in France averted, and with the economy
on its best run in years, there may be tweaks to the ECB's
opening statement in June.
Benchmark German government 10-year bond yields hit the
day's high of 0.39 percent following the story, up
nearly 6 basis points on the day. Most other euro zone yields
also surged, closing up 5 to 9 bps on the day.
The euro rose as high as $1.0939, breezing past previous
resistance at $1.0912.
"Obviously with the political risk moving out of the way for
France, ECB policy is starting to come more into focus so this
report was well timed in that respect," said MUFG strategist Lee
There had been some concern at the ECB and in other European
Union circles that France might face a choice between two
anti-euro candidates for president, one from the left and open
from the right.
The emergence of centrist Emmanuel Macron as favourite to
win the second and final round of the election in May has eased
those concerns, however.
French government bond yields, which fell sharply on Monday
and on Tuesday morning, closed up 6 basis points at 0.82
The gap to German equivalents, which earlier hit
its lowest since November at around 40 bps, closed at 45 bps.
The ECB meets on Thursday but sources told Reuters there was
little appetite to change the pledge to buy bonds at least until
the end of the year and to keep rates at rock bottom until well
"The ECB will probably conclude that it is too early to
announce plans to further reduce its asset-purchase programme,"
said Franck Dixmier, global head of fixed income at Allianz
"Particularly given that making any public statement about
tapering would cause financing conditions to tighten by driving
rates higher, which would make issuing such a statement
counterproductive to the central bank's goals."
Money markets are pricing in around a 50 percent chance of
an interest rate rise early next year, with expectations rising
after the result of Sunday's vote in France.
(Additional reporting by Abhinav Ramnarayan Editing by Jeremy