| LONDON, Sept 29
LONDON, Sept 29 Euro zone government bonds
yields were broadly higher on Thursday, with Finland's 10-year
yield moving out of negative territory, as a surprise decision
by OPEC to trim crude oil output boosted both oil prices and
risk appetite globally.
Oil prices soared more than 6 percent on Wednesday on news
of the first agreement by the Organization of the Petroleum
Exporting Countries to limit its production since 2008.
While there was some caution as markets opened on Thursday
as to how OPEC would implement such a plan, oil prices held near
their highs, underpinning stocks and risk appetite while
refocusing bond investors' attention on inflation prospects.
The result was a sell-off in bonds, which have seen strong
gains this week as concerns about the health of Germany's
biggest lender -- Deutsche Bank -- boost the appeal of
Germany's benchmark 10-year bond yield rose for the first
time this it week, rising 2 basis points to minus 0.13 percent
. Two-year yields moved further away from a record
low of minus 0.71 percent hit at the height on
Germany banking fears on Tuesday.
Across the euro zone, bond yields were about 2 bps points
higher, with Finland's 10-year bond yield at 0.01 percent having
closed in negative territory for two straight days
Patrick Jacques, European rates strategist at BNP Paribas,
said he thought the upward pressure on bond yields would prove
"Even if there's a 5 percent rise in oil prices, this will
not trigger a strong rebound in inflation and at these levels,
oil output is still higher than demand so we're unlikely to see
a massive rally in oil," he said. "So, I view this move in bond
yields as a short-term correction."
Germany, Europe's biggest economy, is set to release
preliminary inflation numbers for September later in the day.
That will be followed on Friday by the flash estimate of
September euro zone inflation numbers.
Elsewhere, Italy is scheduled to sell government bonds
including a new 5-year BTP later in the day.
In Spain, politics moved back into the market spotlight
after senior members of the Socialist party resigned en masse in
a bid to unseat their leader and break a political impasse that
has left the nation without a new government for nine months.
There was no immediate impact on Spanish bonds, which
together with their Italian and Portuguese peers drew support
from the recovery in risk appetite.
Peripheral bond markets in the euro zone often move in line
with other risk assets such as stocks.
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(Reporting by Dhara Ranasinghe; Editing by Raissa Kasolowsky)