Longer-term euro zone bond yields edge up after Chinese PMI data
By Marius Zaharia
LONDON (Reuters) - Longer-dated euro zone bond yields edged higher on Monday on the back of upbeat Chinese factory data, while short-term yields remained anchored near zero as ECB President Mario Draghi clarified the bank's guidance on rates.
The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose more than expected to 50.8 in June from May's final reading of 49.4, beating a Reuters poll estimate of 49.7 and moving above the 50-point level that separates growth in activity from contraction.
The data pushed investors towards riskier assets, before the euro zone publishes its own PMI surveys at 0800 GMT.
German 10-year Bund yields, the benchmark for euro zone borrowing costs, rose 1 basis point to 1.35 percent, with yields across the region posting similar moves.
Two-year German yields were flat at 0.04 percent, while similarly-dated yields in other euro zone countries mostly edged lower after the European Central Bank's Draghi said that prolonging banks' access to unlimited liquidity up to the end of 2016 was a signal on rates.
His Austrian colleague Ewald Nowotny also said the ECB was unlikely to raise rates until 2016.
"Positive PMI data from Asia moved core rates a bit higher this morning ... (but given) the ECB's stance, it will take a big surprise in euro zone PMI to see major market moves," said Jan von Gerich, chief fixed income analyst at Nordea.
"Clearly Draghi wants to strengthen the forward guidance and he has put more flesh on the bones with those comments."
Surveys showed French business activity has slowed more than expected this month, but the data had little impact on the euro zone market.
Traders expected profit-taking on this year's rally before the end of the quarter and debt sales from Italy this week to put some selling pressure on peripheral debt.
Italy sells up to 3.5 billion euros of inflation-linked debt and zero-coupon bonds on Wednesday and medium- and long-term bonds on Friday.
(Reporting by Marius Zaharia; Editing by Toby Chopra)
