Bund yields edge higher, French spread widens slightly

Jan 27 (Reuters) - Bund yields inched higher on Tuesday after ending a seven-day climb the day before, keeping close to their highest levels since March, when German political leaders agreed to sharply increase fiscal spending.

Escalating trade tensions lingered in the background after U.S. President Donald Trump said on Monday he would raise tariffs on South Korean goods.

Germany’s 10-year government bond yield DE10YT=RR, the euro area’s benchmark, rose one basis point to 2.87%, after hitting 2.9070% on Friday. It reached 2.94% in mid-March.

German 2-year yields DE2YT=RR, more sensitive to expectations for policy rates, were flat at 2.11%.

The 30-year yield DE30YT=RR was up 0.5 bps at 3.49%. It rose to 3.556% in late December, its highest since summer 2011.

The yield gap between French government bonds and safe-haven Bunds DE10FR10=RR - a market gauge of the risk premium investors demand to hold French debt - widened to 57 bps after hitting a fresh 19-month low at 55.50 bps on Monday.

Italy’s 10-year government bond yields IT10YT=RR rose 1.5 bps to 3.48%. The gap versus Bunds was at 58 bps, after tightening to 53.50 in mid-January, its lowest level since August 2008.