LONDON, Aug 19: Euro zone government bonds yields rose sharply on Monday, with 10-year yields hitting their highest level in more than a week as a strong rebound in stock markets took the shine off safe-haven debt.

With little major market-moving economic data out, bonds took their cue from European bourses which rallied about two percent, gaining momentum after a firm Wall Street open.

“Stocks seem to be the driving force for bonds in the absence of anything else,” said John Ratcliffe, senior fixed income analyst at IFR. “The short-term trend appears to be down given that there is a dearth of economic data this week.

The benchmark 10-year Bund yield was up some five basis points on the day at 4.61 per cent, within sight of earlier one-week peaks around 4.62 per cent and well above nine-month lows hit last week at 4.41 per cent.

The two year Schatz yield was 3.3 basis points higher at 3.64 per cent and heading towards two-week highs set on Friday at 3.68 per cent.

The euro debt market showed little immediate reaction to data confirming an annual 1.9 per cent rise in euro zone consumer prices in July, below the European Central Bank’s two percent target ceiling.

The December Euribor futures contract, a market barometer of euro zone rate expectations, was down 0.005 at 96.605, indicating short-term interest rates at 3.40 per cent.—Reuters