German bond yields close to the ECB deposit rate

* Eurozone Periphery Government Bond Yields

Aug 5 (Reuters) – Eurozone bond yields looked for direction in calm trade on Thursday ahead of a reading of key US jobs data expected on Friday.

Government bond yields on both sides of the Atlantic continued to decline in the first week of the month after falling in July that gave them their best performance since the start of the pandemic and earlier. Bond yields move in the opposite direction to prices.

Eurozone government bond yields have moved in parallel with US Treasury yields in recent sessions, as a potential reduction in Treasury issuance later in the year and data on private employment and Weaker-than-expected manufacturing growth helped keep US yields near lows.

With little data to move eurozone markets on Thursday, Germany’s 10-year yield, the benchmark for the block, was unchanged at -0.496% at 07:03 GMT after falling below -0.50 %, the key rate of the European Central Bank, for the first time since January Wednesday.

“Bunds are expected to remain strong even though markets are expected to continue struggling at the -0.50% level on 10-year yields, as signaled by the massive sell-off in the US yesterday,” said Michael Leister, head of the interest rate strategy at Commerzbank.

Data on Thursday showed German industrial orders rose more than expected in June after falling in May, but material shortages continue to weigh on production. However, it had little impact on the bond markets.

Bond markets focused on announcing the Bank of England’s policy later Thursday, where it is expected to keep support for the UK economy at full speed. However, the central bank could also start to outline its plan on how it will eventually reverse its stimulus.

At auction, France will raise up to 7.5 billion euros from the reopening of bonds due 2031, 2032 and 2034. Spain will raise up to 5 billion euros from bonds due 2024 , 2026 and 2031, and up to 750 million euros from an inflation-linked bond due 2030.

Bond markets are eyeing US non-farm wage data, due Friday, which could be the next catalyst to move US Treasuries, which Eurozone government bonds will likely follow. (Reporting by Yoruk Bahceli; Editing by Giles Elgood)

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