Yields in the euro zone fall, but the US Treasury milestone UU It hovers over the market

* Bonds in demand before the Ifo survey, debt swaps

* But US 10-year yields hover near the 3 pct level

* Italy / Germany extends even before the meeting of the ECB

* Eurozone periphery government bonds tmsnrt.rs/2ii2Bqr

By Abhinav Ramnarayan

LONDON, April 24 (Reuters) – Investors resumed buying eurozone government bonds on Tuesday, pushing lower yields, such as an excess of redemptions and a weakening of the economic climate once again became the key drivers of the market.

A poll by the Ifo Institute in Germany is expected on Tuesday morning to confirm a decline in positive business sentiment in the bloc, while 41 billion euros of rebates on French government bonds should only boost demand for debt .

However, badysts warned that all bets are off if the US Treasury yields. UU At 10 years they reach 3 percent, after having been about to touch that milestone of psychological importance on Monday.

"In addition to the imbalance between supply and demand, the Ifo survey highlights what we have identified earlier as a decline in economic sentiment in the euro zone that should support the market," said Commerzbank strategist Christoph Rieger.

The borrowing costs of the euro zone fell in general, with the yield of German Bunds at 10 years, the reference point for the block, falling 1.5 basis points to 0.62 percent.

Most bond yields in the euro zone were 1-2 basis points lower.

This could change depending on what happens to the debt on the other side of the Atlantic. Yields on US Treasury bonds UU Ten years were 2,966 percent and with oil prices rising above $ 75 per barrel for the first time since the end of 2014, an additional increase can not be ruled out.

"If this will usher in a new range or the beginning of a bear market is the question, or if it is a welcome purchase opportunity," said Rieger of Commerzbank.

Any increase in the yields of US Treasury bonds. UU It is likely to be a "magnet" and cause euro zone yields to rise, he said.

Meanwhile, the market is also preparing for the European Central Bank meeting on Thursday, with investors hoping to get an idea of ​​how concerned legislators are about the blunting of economic sentiment in the bloc.

Any increase in concern should push the prospect of rising rates even further and the potential for badet purchases will continue through the end of the year.

Later on Tuesday, ECB member Francois Villeroy de Galhau should talk about issues that include prospects for the ECB badet purchase program.

In recent weeks, peripheral government bonds – seen as beneficiaries of the ECB's bond purchase scheme – have performed strongly compared to their better-qualified peers.

The performance of Italy's 10-year government bonds on Germany is close to its narrowest level since August 2016 at 116 basis points, despite political uncertainty in that country after the March general election.

The Italian president asked the head of the lower house of parliament on Monday to verify whether the 5-star Movement and the center-left Democratic Party (PD) could form a coalition government, but the initial reaction suggested that it would be a unlikely party. (Reporting by Abhinav Ramnarayan Edited by Andrew Heavens)


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