* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Olga Cotaga
LONDON, May 21 (Reuters) - Italian government 10-year bond yields rose slightly on Thursday from a near six-week low reached this week as nervous investors awaited more detail to emerge from the proposed 500 billion euro ($547.90 billion) EU recovery fund.
Amid continued uncertainty over whether the fund will be financed by grants or loans, the 10-year BTP yield was up 1.1 basis points at 1.64%, not far from the 1.59% low it touched on Tuesday.
The premium Italy pays over the benchmark German 10-year Bund yield rose slightly as well to 211 bps.
Spanish 10-year bond yields rose 2.4 bps at 0.73% .
Spain plans to reopen bonds from three-year to 50-year maturities on Thursday to raise between six and seven billion euros, according to ING analysts.
In Italy the sale of BTP Italia will enter its second phase for institutional investors after already collecting orders of around 14 billion euros from individual investors over the past three days. Supply activities will take a breather after Thursday, analysts said.
“The initial proposal (of a recovery fund) from Germany and France was seen as proactive, but at the same time there was opposition from other countries, offering counterproposals. Some headwinds to the idea already, so I guess markets are accepting that there will be ongoing political discussion around that,” said Rainer Guntermann, rates strategist at Commerzbank.
A group of European Union states will propose funding coronavirus recovery efforts with loans, not grants, as the Franco-German plan calls for. “The discussion is still early days, that’s why markets tread water,” Guntermann said.
Spanish yields were inching higher partly because there is an option for Spain to issue a 50-year government bond, “so quite a bit of duration,” he added.
In core European markets, yields were falling mostly by 1 to 2 bps, with safe-haven German 10-year government bond yields down 1.6 bps at -0.48%.
Investors turned more risk-off after the World Health Organization said there were 106,000 new cases of the new coronavirus recorded worldwide in the last 24 hours - the most in a single day yet.
Global coronavirus infections surpassed 5 million on Wednesday, with Latin America overtaking the United States and Europe in the past week.
Traders were watching the flash euro zone IHS Markit Purchasing Manager’s Index due at 0800 GMT. Economists polled by Reuters expected the composite PMI to have improved slightly in May to 25 from 13.6. ($1 = 0.9126 euros) (Reporting by Olga Cotaga Editing by Mark Heinrich)