* Strong euro zone economy keeps markets calm
* Portugal's 10-year bond yield at lowest since early Jan
* Fischer comments reassure investors on U.S. direction
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Abhinav Ramnarayan
LONDON, March 29 High-rated government bond
yields edged lower but the moves were fairly contained as
optimism about the state of the euro zone economy calmed market
nerves on that day Britain triggered formal divorce proceedings
from the European Union.
In a sea change from fears that gripped the region on the
day after last June's Brexit vote, high-rated euro zone
government bond yields rose briefly in early trade but some
end-of-month buying pushed them back down as the session wore
"Today is a big day for the history books but it seems the
market is not bothered too much by the triggering of Article
50," said Commerzbank strategist David Schnautz.
Germany's 10-year government bond yields edged a touch lower
to 0.37 percent on the day and most other
high-rated bonds were flat to 1 basis point lower.
The yield on Portugal's 10-year government bond yields,
which normally rises in uncertain times, fell to its lowest
level since early January at 3.72 percent, down 4 basis points
on the day.
Schnautz attributed buying of euro zone government bonds to
end-of-month flows, when many banks and insurance companies look
to shore up "safe" assets ahead of having to report on the
make-up of their balance sheets.
This is a different scenario from June last year, when
10-year German government bond yields dropped to minus 0.16
percent on the day after the Brexit vote and South European
countries such as Portugal saw their government bond yields
Analysts cited a strengthening euro zone economy and a
higher inflation expectations as the main cause for the relative
calm this time round.
"A mixture of good data seems to be proving the European
economy is doing quite well," said DZ Bank strategist Daniel
Lenz, pointing in particular to a survey on private sector
activity released last Friday.
Businesses across the euro zone marked the end of the first
quarter by ramping up activity at the fastest pace in almost six
years to meet burgeoning demand, a survey found.
This is the latest in a string of data releases that suggest
returning growth and inflation in the euro zone, a very
different picture from the one predicted by many when Britain
voted to leave the EU in June last year.
Yields came under some upward pressure after the U.S.
Federal Reserve vice chair signalled on Tuesday that two more
rate hikes are on the cards this year, soothing concerns that
inflation and growth expectations in the world's richest country
may have been overdone.
Stanley Fischer said two more rate hikes this year "seems
about right", pushing 10-year U.S. government bond
"The possibility that all in all there could be three rate
hikes this year could be a trigger for higher yields today as
well," said DZ Bank's Lenz.
U.S. President Donald Trump's failure to push through a
healthcare bill sparked concerns that he may struggle to go
through with infrastructure spending promises, thereby
potentially reducing expectations for growth and inflation in
(Reporting by Abhinav Ramnarayan; Editing by Mark Trevelyan)