* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, May 10 (Reuters) - Euro zone bond yields rose on
Monday as investors returned their focus to a brighter economic
outlook and its implications for central bank policy following
large swings following Friday's U.S. non-farm payrolls data.
Rising crude oil prices after a major cyberattack forced the
shutdown of critical fuel supply pipelines in the United States
added to upward pressure on bond yields by boosting inflation
expectations.
Germany's 10-year Bund yield rose to its highest level in
almost a week, while Italian borrowing costs held near their
highest levels since September.
"There is a very broad consensus out there for higher Bund
yields, and we agree," said ING senior rates strategist Antoine
Bouvet.
"There is a visible nervousness in peripheral debt at the
prospect of ECB slowing purchases down. We're surprised the
market hasn’t come to terms with it yet," he added.
While the European Central Bank (ECB) has stepped up the
pace of buying within its PEPP emergency stimulus scheme, signs
that the recovery is taking hold have led some officials to talk
about slowing purchases in the months ahead.
ECB policymaker Martin Kazaks said on Friday the central
bank could decide to reduce the pace of its emergency bond
purchases in June if borrowing costs remain low.
But the road to recovery from the coronavirus pandemic will
be long, ECB Chief Economist Philip Lane told French newspaper
Le Monde in an interview published Monday, highlighting
divisions within the ECB's Governing Council.
The ECB's latest bond-buying data will be published later in
the day.
In early trade, most 10-year bond yields in the currency
bloc were 1-2 basis points higher on the day.
Germany's benchmark 10-year Bund yield was up 2.2 bps at
-0.19%, its highest in almost a week.
Italy's 10-year bond yield was 1.3 bps higher at roughly
0.94% -- holding near its highest level since
September last year.
Data on Friday showing the U.S. economy added just 266,000
jobs in April, a fraction of nearly a million expected,
triggered big but short-lived swings in U.S. and euro zone
government bonds.
Analysts said markets now appeared to be looking past those
numbers and to Wednesday's U.S. inflation data for the next key
indicator of the U.S. economic outlook.
(Reporting by Dhara Ranasinghe)