May 3 (Reuters) - Euro zone bond yields held steady on Monday, as investors watched for the next move after a sell-off last week that gave the region’s benchmark bond yield its biggest weekly rise since February.
It was expected to be a relatively quiet trading session given a public holiday in London.
While German bonds underperformed U.S. Treasuries and yields, which move inversely with prices, rose in April, the sell-off intensified last Thursday, when German inflation advanced further above the European Central Bank’s target, and U.S. data showed economic growth speed up in the first quarter.
The move came as investors look out for any data hinting that central banks may start scaling back extraordinary monetary stimulus, which holds down government borrowing costs.
Expectations of higher growth and a reignition of inflation, first triggered by a vast fiscal stimulus in the United States, have already pushed up government bond yields this year, particularly sharply in February.
On Monday, Germany’s 10-year Bund yield, the benchmark for the region, was poised to maintain calm for a second session, down around 1 basis point to -0.21% by 0630 GMT, holding below the highest since March 2020 touched on Thursday at -0.177%.
Lower-rated Southern European bond yields were also stable, with Italy’s 10-year yield down 1 basis point to 0.86%, after touching the highest since September 2020 last week.
“The Bund market will be particularly closely monitored for any indications as to whether last week’s developments were a one-off or whether they might be the beginning of a new trend,” UniCredit analysts told clients.
The European Central Bank can start to phase out emergency stimulus measures when the pace of coronavirus vaccinations reaches a critical level and the economy picks up speed, Vice President Luis de Guindos told an Italian newspaper.
Some investors are already preparing for a bigger rise in euro area government bond yields as vaccinations speed up and there is some concern of market unease ahead of the ECB’s June meeting, where it will have to review its decision from March to speed up its pandemic emergency bond purchases.
Data on Monday showed German retail sales posted an unexpected surge in March as the relaxation of some lockdown measures boosted purchases.
The main data focus on Monday is the ISM U.S. manufacturing activity figure due at 1400 GMT, which a Reuters poll expects to show slight growth in April.
(Reporting by Yoruk Bahceli; Editing by Subhranshu Sahu)