Euro zone bond yields hold steady near multi-year highs

By Sophie Kiderlin

LONDON, Mar 30 (Reuters) - Euro zone bond yields were broadly steady on Monday, remaining near multi-year highs, as investors mulled the risks of the Iran war for inflation and economic growth.

The Israeli military said Iran launched multiple waves of missiles at Israel and that the Air Force was carrying out strikes on Tehran on Monday.

The latest attacks came a day after President Donald Trump said the U.S. and Iran had been meeting "directly and indirectly" and that Iran's new leaders have been "very reasonable", even as more U.S troops arrived in the region.

German 10-year bund yields DE10YT=RR, the benchmark for the euro zone, were last steady at 3.0977%. They hit 3.13% on Friday, their highest level since May 2011 and were last on track to end March around 44 bps higher.

Yields on Italian 10-year bonds IT10YT=RR were last 1.8 bps lower at 4.0506%, having risen to their highest since mid-2024 on Friday.

Global government bonds have been under pressure since the early days of the conflict as higher oil prices have driven up inflation expectations and raised bets on higher central bank interest rates.

Markets this week will get some insights into how the conflict in the Middle East has been impacting the economy, with flash euro zone inflation due Tuesday.

After long hovering around the 2% target and coming in at 1.9% in February, a Reuters poll of economists is expecting inflation to have jumped to 2.7% in March, which would be its highest level in over two years.

Money markets were last pricing in around three rate hikes. Before the Iran conflict erupted, the balance was towards a cut from the ECB this year.

ECB board member Isabel Schnabel on Friday said there was no need for the central bank to rush into action.

German two-year bund yields DE2YT=RR were last little changed at 2.6803%, while the Italian two-year bond yields IT2YT=RR last dipped 2.3 bps to 2.9787%.

They were last set to rise around 67 bps and 84 bps, respectively, in March as shorter-dated bonds have been hit especially hard.