Euro zone bond yields edge lower, eyes on U.S. data
By Stefano Rebaudo
MILAN, Sept 2 (Reuters) - Euro zone bond yields were edging lower but within striking distance of six-week highs on Thursday, with investors on edge ahead of Friday's U.S. job report and after hawkish European Central Bank policymakers pushed the case for tightening.
Recent comments by ECB officials have led investors to expect the ECB will decide at next week's meeting to reduce the pace of its bond purchases in the final quarter.
German Bundesbank chief Jens Weidmann warned that euro zone inflation is at risk of overshooting, while ECB President Christine Lagarde said the economy was recovering and only needed "surgical" support targeted at some sectors. nF9N2N601NnS8N2MM03B
Germany's 10-year government bond yield, the benchmark for the bloc, was down 0.5 basis points at -0.378%. DE10YT=RR
"The verbal interventions should calm down as the ECB enters its blackout period, but ECB anxiety remains high," Commerzbank analysts told clients.
By now, the market should be ready "for a reduction in the Q4 purchase pace, which should not be confused with tapering ... or the beginning of the end of PEPP," they added, referring to the ECB's Pandemic Emergency Purchase Programme.
Italy's 10-year government bond yield IT10YT=RR fell 1 basis point to 0.683%.
Duration supply remained in focus, with France and Spain in the primary market with long-dated bond auctions on Thursday.
U.S. borrowing costs were largely unchanged in early London trading, with the 10-year Treasury yield flat at 1.3% as the market focused on Friday's non-farm payrolls reports. nL1N2Q31RC U.S. jobless claims data are due on Thursday.
"It would take a major disappointment to put the timing of tapering in question seriously," Unicredit said, referring to a possible reaction to recent U.S. data.
"ADP numbers came in much weaker than expected, but investors should be cautious as this statistic has been a poor guide to actual payroll numbers," they added.
U.S. private employers hired far fewer workers than expected in August, but the labour market continues to steadily recover. nL1N2Q31RC
(Reporting by Stefano Rebaudo, Editing by Catherine Evans)