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* Euro zone bond yields up 1-2 bps on day
* German state of Saxony April CPI up 1.6 pct y/y
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, April 30 (Reuters) - Government bond yields in the euro area nudged higher on Monday as focus turned to preliminary inflation data from Germany and Italy, two of the bloc’s biggest economies.
Consumer prices in the German state of Saxony rose by 1.6 percent year-on-year in April, up from 1.5 percent in March, kicking off inflation releases from the German states.
Preliminary pan-German consumer price data is due at 1200 GMT and is based on data from up to 16 states.
Benchmark 10-year bond yields were 1 to 2 basis points higher across the bloc in early trade.
A softening in euro zone economic data and signs that inflationary pressures remain subdued, encouraging the European Central to hold off from raising interest rates until well into 2019, have supported bond markets in recent weeks.
German monthly retail sales unexpectedly fell in March, data showed on Monday, marking a fourth consecutive drop and dampening cheer around a consumer-led upswing in Europe’s biggest economy.
“Markets are able to cope with a small rise in inflation, while any softness would be reinforce expectations that the economy has slowed,” said Peter Chatwell, head of rates at Mizuho in London.
Germany’s benchmark 10-year bond yield was up almost 2 bps at 0.58 percent in early trade, above a one-week low of 0.56 percent hit on Friday.
That in part reflected a rally in world stock markets thanks to upbeat earnings data and last week’s historic summit between North Korean leader Kim Jong Un and South Korea’s Moon Jae-in last week at which they vowed “complete denuclearization”.
In addition to inflation data, bond investors also awaited this week’s U.S. Federal Reserve meeting although no major changes to monetary policy are expected. (Reporting by Dhara Ranasinghe Editing by Matthew Mpoke Bigg)