* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Yoruk Bahceli
AMSTERDAM, Aug 28 (Reuters) - German bond yields rose to
their highest since early June in early Friday trade, after the
U.S. Federal Reserve's decision to target average inflation
pushed yields to multi-month highs on both sides of the
Atlantic.
Fed Chairman Jerome Powell said on Thursday the central bank
would now try to keep inflation at an average 2% over time,
offsetting below-2% periods with higher inflation "for some
time", and to ensure employment does not fall short of its
maximum level.
Attention now turns to inflation readings in the euro zone
after the Fed's decision.
French inflation on Friday came in line with expectations
from a Reuters poll, rising 0.2% in August, down from 0.9% in
July. German and euro zone inflation readings will
follow next week.
Readings are expected to show euro zone inflation at just
0.2% August, far below the European Central Bank's target of
close to but below 2%, leading some analysts to see the rise in
market inflation expectations as unsustainable. Long-term
expectations are now near their highest since early February,
before the coronavirus shook European markets, at over 1.25%.
"Today's first indications for euro inflation during August
from France should underscore the central banks' challenges in
reaching their inflation targets," Commerzbank's head of rates
and credit research, Christoph Rieger, told clients.
"With this, euro break-evens at pre-crisis levels hold
downside potential and we still see better value in buying Bund
dips above -0.4% 10-year yields," he said, referring to the
measure of inflation expectations.
Germany's 10-year yield rose to their highest since early
June at -0.372% in early trade. They were last up 2 basis points
at -0.38%.
Italy's 10-year bond yield rose 2 basis points to its
highest in nearly four weeks at 1.115% ahead of an auction.
Italy is scheduled to sell 8.25 billion euros through a new
five-year bond and re-open three- and 10-year bonds.
(Reporting by Yoruk Bahceli, editing by Larry King)