* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, March 2 Euro zone government bond yields
edged up on Thursday ahead of data expected to show the fastest
rise in euro area consumer prices in over four years.
Europe's benchmark German 10-year yield hit a 10-day high,
buttressed by expectations that the U.S. Federal Reserve is set
to raise interest rates later this month. Governor Lael Brainard
joined the chorus of policymakers signalling a hike may come as
soon as mid-March late on Wednesday.
But the main event in the euro zone on Thursday was flash
inflation for February due at 1000 GMT.
Economists polled by Reuters predict annualised price growth
of 2 percent, while some analysts expect an even higher figure
in what is set to be the first reading in line with the ECB's
medium-term target since January 2013.
The highest print of German inflation in four-and-a-half
years on Wednesday has already triggered fresh calls from the
bloc's biggest economy for the ECB, which targets inflation of
below but close to 2 percent, to end loose monetary policy.
The ECB is scheduled to run its quantitative easing
bond-buying scheme until at least December and has pushed
interest rates deep into negative territory to try to stimulate
weak growth and hitherto stubbornly low inflation.
"Today's Eurozone CPI data will likely show that the
headline inflation rate breached 2 percent for the first time in
four years – which could extend bearish momentum (in bonds),"
ING's global head of debt and rates strategy Padhraic Garvey
Strategists said lower core inflation, a measure that
excludes the effect of sharply rebounding energy prices over the
last year, could temper the market reaction because it would
signal that consumer price growth may not be durable over time.
The ECB is scheduled to meet in a week's time on March 9.
German 10-year yields rose 2 basis points to 0.30 percent
on Thursday, adding to Wednesday's 4 bps rise seen
after policymakers suggested the Fed was worried about waiting
too long to raise rates in the face of looming economic stimulus
Further comments from Brainard, a key voice throughout 2015
and 2016 in warning that trouble in Europe and
slower-than-expected growth in China could hurt the United
States, an argument that helped slow the Fed's expected pace of
tightening, has served to firm expectations for a hike.
Most other euro zone yields were up slightly on the day.
Analysts said bond auctions on Thursday from Germany and
Spain should also keep upward pressure on yields as investors
tend to sell existing bonds ahead of debt sales to make room in
their portfolios for the new supply.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Hugh Lawson)