* German yields hold above one-month lows
* 10 pct oil price rise boosts inflation outlook
* France's Macron clashes with Le Pen in presidential debate
* Polls show Macron has most convincing programme
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, April 5 A surge in oil prices and an
easing of concerns over France's upcoming presidential election
appeared to put the brakes on a fall in euro zone government
bond yields on Wednesday.
Germany's 10-year bond yield - the bloc's benchmark - has
halved over the last three weeks as investors reassessed fiscal
stimulus from the United States and the time scale for the
withdrawal of monetary easing in the single currency area.
But a near 10 percent rise in the price of oil over the last
two weeks, and the inflationary impact that will bring, has
started to make money managers reconsider the outright level of
One of the justifications for these levels is the political
risk posed by the two-stage French presidential election where
far right eurosceptic leader Marine Le Pen is one of the leading
contenders. The decisive run-off vote will be held on May 7.
Le Pen's chances, though, were seen as diminishing after a
TV debate on Tuesday where a snap poll showed her to be the
fourth most convincing candidate, trailing Jean-Luc Melenchon,
Emmanuel Macron and Francois Fillon.
"The rally has been strong in recent days and an
interruption in this trend should be expected," ING senior rates
strategist Martin van Vliet said. "With the TV debate in France
not showing a surprisingly strong showing for Le Pen, the flight
to safety theme is weakening."
In a further sign that investor demand for safe haven German
bonds was waning, bids at an auction of five-year paper on
Wednesday came up short of the amount of offer in what is known
as a "technical failure".
In secondary markets, German 10-year yields rose 1 basis
point to 0.26 percent, off a one-month low of 0.24
percent breached Tuesday but still far from a 14-month high of
0.51 percent seen in the middle of last month.
Most other euro zone yields were flat or slightly higher on
The gap between French and German bond yields was a fraction
tighter after the presidential debate in which leading candidate
Macron clashed sharply with Le Pen over Europe.
While polls indicated Macron lost out to the far-left's
Melenchon as the most convincing performer in the debate, his
programme for office was seen as the most credible of all the
With political fears easing, investor attention switched to
oil, which hit a one-month high near $55 a barrel as declining
U.S. crude inventories and an outage at the largest UK North Sea
oilfield were seen to be clearing a glut.
The oil rise is expected to feed through into future
inflation gauges closely watched by policymakers in the European
Central Bank, some of whom are arguing that economic conditions
warrant the withdrawal of its bond-buying scheme.
One of those measures - the five-year, five-year forward
breakeven rate - climbed to 1.597 percent on Wednesday, away
from a near five-month low of 1.564 percent seen last week.
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 Andrew Bolton)