* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, June 3 (Reuters) - Germany’s benchmark 10-year Bund yield rose on Wednesday to its highest since mid-April, pushed up by optimism in world markets a day before a European Central Bank meeting.
Italy’s borrowing costs also edged higher as the country started the process of selling a new 10-year government bond via a syndicate of banks.
Demand for European government debt in general took a knock as world stocks vaulted to three-month highs on hopes of more stimulus and a further easing in lockdown restrictions globally.
“It looks like the improvement in risk sentiment globally is weighing on safer assets,” said ING senior rates strategist Antoine Bouvet.
Selling in bond markets was expected to be limited ahead of Thursday’s ECB meeting, at which many economists expect the central bank to ramp up emergency bond purchases to bolster an economy ravaged by the coronavirus pandemic.
ECB data released on Tuesday showed the central bank scooped up all of Italy’s new debt in April and May but only managed to keep borrowing costs from rising.
The ECB and the Bank of Italy bought 37.4 billion euros worth of Italian bonds under its emergency bond buying scheme, or 21.6% of the programme’s monthly total, the first breakdown of the figures showed. Italy’s share of the scheme, based on the size of its economy and population, should be 17%.
“There is a clear willingness to tighten spreads by deviating from the capital key, which will help skew market reaction in favour of Italy and Spain if we are right in expecting a top-up of the PEPP (Pandemic Emergency Purchase Programme) tomorrow,” Bouvet said.
In early trade, 10-year German bond yields rose to -0.373% , their highest since mid-April. Ten-year bond yields across the euro area were 2-4 bps higher on the day.
Italy’s 10-year bond yield rose 2.5 bps to 1.53% as Italy’s Treasury started marketing a new 10-year BTP bond via a pool of banks, according to a lead manager. (Reporting by Dhara Ranasinghe, editing by Larry King)