Euro zone bond yields rise, French-German spread narrows after bond auction
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By Alun John and Yoruk Bahceli
LONDON/AMSTERDAM, June 20 (Reuters) -Euro zone government bond yields rose on Thursday though the market got through a French bond auction largely unscathed, as investors digested a string of central bank meetings, including in Britain.
Markets have calmed down in the past few days after being spooked last week by Marine Le Pen's eurosceptic National Rally's lead in opinion polls following President Emmanuel Macron's surprise decision to call a snap parliamentary vote.
The gap between German and French yields widened to a seven-year high of 80 bps at the end of the week.
That gap was last 71.3 bps and narrowed slightly after a French government bond auction, which had been high on investors' watchlist as it was the country's first bond sale since the election was called. DE10FR10=RR
Demand for most of the bonds auctioned was lower than their previous reopenings, but France raised a total of 10.495 billion euros.
That was at the top end of the 8 to 10.5 billion euros it aimed to raise, although it targeted a smaller-than usual size for the auctions.
"The market is relieved," said Commerzbank's head of interest rates strategy Michael Leister, noting that France's spread to Germany tightened before and after the auction, and the country raised the top amount it was targeting.
"It further allows the market to stabilise, which is the important point."
France's 10 year yield was flat at 3.155%. FR10YT=RR
Germany's 10-year bond yield DE10YT=RR, the benchmark for the euro zone, rose 2.4 basis points to 2.43%.
The euro zone benchmark yield hit a two month low of 2.34% last week, as German bunds benefited from a flight to safety due to political uncertainty in France, but has been retracing that move gradually this week.
The gap between Italian and German bunds was also a touch narrower at 151 bps with Italy's 10-year yield IT10YT=RR 0.5 basis points higher at 3.95%.
Earlier on Thursday, the Swiss National Bank cut interest rates for the second time running, pointing to easing price pressures, while Norway's central bank and the Bank of England held its policy rates unchanged.
Reporting by Alun John and Yoruk Bahceli; editing by Emelia Sithole-Matarise, Frances Kerry and Jane Merriman
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