German Bund yields edge up, fiscal plans in focus

March 11 (Reuters) - Euro area benchmark Bund yields edged higher as investors monitored German political developments to assess the size and timing of a planned massive increase in fiscal spending.

Germany's Greens vowed to block plans by likely next chancellor Friedrich Merz to raise state borrowing to revamp the military and revive growth, but forwarded rival proposals on Monday in a bid for compromise.

Germany's 10-year Bund yields DE10YT=RR were up 0.5 basis points (bps) at 2.83%. They jumped by 44.7 bps last week in their biggest rise since February 1990.

Traders priced in a European Central Bank depo rate of 2.05% in December EURESTECBM6X7=ICAP from 1.92% last week before Germany announcement.

Germany's 2-year yield DE2YT=RR, more sensitive to ECB policy rates, dropped 0.5 bps to 2.21%.

The yield gap between Italian and German bonds DE10IT10=RR - a market gauge of the risk premium investors demand to hold Italian debt - was at 106 bps after dropping below 100 bps for the first time since 2021 last week.

The spread between French and German bonds DE10FR10=RR stood at 71 bps, at the lower end of its recent range.