LONDON, June 17 — Government bond yields in the euro area edged up today, ahead of a €5 billion (RM24.1 billion) sale of new 10-year bonds from benchmark issuer Germany.

Bond markets have been pulled between competing forces, brighter economic data such as yesterday’s US retail sales data on the one hand and on the other, concern about a second-wave of the coronavirus and further signs of central bank support that has helped underpin demand for fixed income.

"The tension between better economic data and rising Covid-19 cases continues to drive market volatility,” said Antoine Bouvet, senior rates strategist at ING in London.

A full US economic recovery will not occur until Americans are sure that the coronavirus has been brought under control, Federal Reserve Chair Jerome Powell said yesterday in the first of two days of hearings before US lawmakers.

"Markets see the glass half full, thanks to central bank support,” Bouvet added.

Most 10-year euro zone yields were 1-2 basis points higher ahead of the auction of new 10-year German government bonds.

"We expect investor demand to be robust considering the current uncertain backdrop, and with a reasonable pullback in yields yesterday,” analysts at Mizuho said in a note.

Germany’s benchmark 10-year Bund yield edged up to -0.41 per cent , holding above three-week lows hit on Monday at -0.47 per cent. Italy’s 10-year bond yield was 1.5 bps higher on the day at 1.38 per cent.

German Finance Minister Olaf Scholz is expected to present a supplementary budget later today that pushes up new debt to a record €218.5 billion this year — equal to about 6.5 per cent of German output. — Reuters