German yield curve on track for fourth straight weekly steepening

By Stefano Rebaudo

July 18 (Reuters) - The German yield curve was heading for its fourth straight week of steepening as investors shifted their focus to expansionary fiscal plans, pushing long-dated yields higher while short-dated ones held steady.

Euro area government bond markets also took cues from U.S. Treasuries, where 10-year yields rose amid concerns over the Federal Reserve's independence and a potential inflation resurgence driven by tariffs.

German 2-year government bond yields DE2YT=RR – more sensitive to expectations for European Central Bank policy rates – rose 1 basis point (bp) to 1.85% on Friday. They were around the same levels in early June.

Germany’s 10-year government bond yield DE10YT=RR, the euro area’s benchmark, climbed 1 bp to 2.70%. It was at around 2.48% in early June.

The gap between German 10-year and 2-year yields DE2DE10=RR is on track for a 4 bps rise this week. It’s also about to post a significant monthly increase in July, following a period of stability since April.

U.S. Treasury yields fell in early London trade, with the 10-year down 2 bps at 4.44% US10YT=RR, after rising modestly across most maturities on Thursday.

Italy’s 10-year government bond yields IT10YT=RR were up 2 bps at 3.58%. The spread between BTPs and Bund yields - a market gauge of the risk premium investors demand to hold Italian debt - was 88 bps. It hit 84.20 bps in June, the lowest since March 2015.