German 30-year yields set for steepest weekly rise in almost two months

German ultra-long-dated yields were heading for their steepest weekly increase in nearly two months on Friday on expectations of continued bond supply pressure, with investors awaiting PMI figures later in the session.

Economists expect the euro area to increase fiscal spending after Germany unveiled landmark investment plans, while geopolitical tensions are also prompting greater defence outlays across the single-currency bloc.

Germany’s 10-year government bond yield DE10YT=RR, the euro area’s benchmark, was flat at 2.88%.

The 30-year yield DE30YT=RR was 0.5 basis points lower at 3.49%, and set for a weekly rise of 7 bps, the biggest since early December.

Meanwhile, hawkish signals from the Bank of Japan on Friday lifted short-term government bond yields to a three-decade high, while 30-year borrowing costs JP30YTN= fell 3 bps to 3.64% after hitting an all-time high at 3.68% earlier this week.

The gap between 30-year and 10-year German bond yields was at 60 bps, and set to end the week 3.5 bps higher, the biggest widening since mid-November.

German 2-year yields DE2YT=RR, more sensitive to expectations for policy rates, were flat at 2.11% and on track to end the week roughly unchanged.

Italy’s 10-year government bond yields IT10YT=RR dropped 0.5 bps to 3.51%. The gap versus Bunds was at 59 bps, after tightening to 53.50 last Friday, its lowest level since August 2008.

-Stefano Rebaudo/Reuters