UPDATE 1-Green shoots in world economy push German Bund yield to 4-week high - EntornoInteligente

Entornointeligente.com / * China data overnight beats expectations, lifts sentiment

* Italy bond market steadies after Tuesday’s selloff (Updates with comment, context)

By Dhara Ranasinghe

LONDON, April 17 (Reuters) – Germany’s 10-year government bond yield rose to its highest level in four weeks on Wednesday as Chinese economic data beat expectations, easing concerns about a global growth slowdown.

China’s economy grew at a steady 6.4 percent in the first quarter from a year earlier, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement.

The news boosted risk sentiment, hurting safe-haven assets in turn.

“The Chinese data supports the green shoots story and the momentum in bond markets is shifting as the gloomiest forecasts are being taken out,” said Jan von Gerich, chief market strategist at Nordea.

Germany’s 10-year yield rose 2.5 basis points to a high of 0.088 percent. It is now up almost 20 bps from a 2-1/2-year low below zero hit last month as recession fears gripped world markets.

A 1 billion euro sale of 30-year German bonds later in the day also put some upward pressure on yields.

Other 10-year bond yields in the currency bloc were also around two bps higher on the day .

Analysts said the weaker tone in bond markets may also stem from a report this week that there was little enthusiasm among European Central Bank policymakers to take action to offset the side effects of negative interest rates.

Italian bond yields steadied after a selloff on Tuesday sparked by a Bank of Italy warning on the country’s rising budget deficit.

Italy’s economy showed encouraging signs in the first two months of this year, Economy Minister Giovanni Tria said on Wednesday.

Analysts said that even with the selloff in euro zone bonds, the rise in yields was likely to be limited given the still weak economic growth outlook in the bloc as well as uncertainty over Brexit and world trade tensions.

Several ECB policymakers think the bank’s economic projections are too optimistic, four sources with direct knowledge of discussions told Reuters on Tuesday.

The next test for bond markets is expected on Thursday, with the release of flash April euro zone Purchasing Managers’ Index (PMI) data, a closely watched indicator of economic trends. (Reporting by Dhara Ranasinghe, editing by John Stonestreet)



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